All four South African banks offer home loans with both fixed rate and variable interest options that can be paid back over a given period of time, from five to 30 years. They also all have a range of options, and most will finance vacant land, homes and also building projects, within their own set of rules. Here is a smattering of information about the four of them.

Absa home loans

Absa Bank caters for individual people and couples who earn either above or below R15 000. They are willing to finance 100% loans for smaller loans, and will tailor-make home loans for their own existing clients. Absa also has a home loan package for people who want to buy and then rent out the property.

First National Bank loans

Like Absa, FNB has options for both individuals and couples who earn up to R15 000 or more than R15 000. FNB has also created specialised packages for both foreigners wanting to invest in domestic property in South Africa, and Muslims who are bound by the Islamic faith that does not allow any form of money interest. FNB's IslamicFinance package isn't limited to those of the Muslim faith, but it is only available for bonds in excess of R240 000.

Nedbank home loans

While Nedbank will finance both vacant land as well as houses, they appeal to the higher end of the market, and they don't offer specific deals for first time home buyers or those people who earn a small monthly income. Like Absa, Nedbank has a specific home loan for those who want to buy and then rent the property out. Clearly aiming at people who aspire to being successful, Nedbank does have a different type of home loan – and this allows borrowers to apply for an amount which is more than the value of the property that they are buying. This additional money is not paid out when the bond is registered, but it is available later, when the property is worth more or when the borrower is able to afford a larger repayment figure.

Standard Bank home loans

Standard Bank caters for the lowest income bracket, offering DreamStart home loans to entry-level home buyers who earn between just R1 500 and R6 000 a month. Standard also has home loans available for first time buyers who earn at least R6 000 both jointly (husband and wife) or on their own. Their standard (or ordinary) home loans are offered to anyone in permanent employment who earns more than R6 000. It will be up to you to decide whether this bank offers the best home loan or whether you will find it at another financial institution.

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Traditional home loans

Individuals earning at least R15 000 a month qualify for FNB's traditional home loan packages, providing they have a clear credit record. In addition, "joint applicants" (which include married couples) and other legal entities (trusts, close corporations and so on) also qualify. Loans may only be used to buy a residential property and applicants must be between 18 and 55 years. FNB requires applicants to produce proof of income or, if self employed, six months' bank statements, as well as proof of residence, an identity document, marriage certificate and a copy of an offer to purchase, if there is one.

Smart Bond home loans

The Smart Bond home loan option is for South African residents who earn less than R15 000 a month. It provides purchasers with 100% of the money needed to buy a home, which means that they don't have to put down any form of deposit. The minimum loan amount is R20 000 and the repayment period is five to 20 years. Instalments have to be paid either by a debit order or directly by their employer (using a payroll deduction facility). First time home buyers get a home-ownership education programme supplied absolutely free. However this type of home loan carries an initiation fee of R3 990 (including VAT) that has to be paid when the loan is taken out. They also charge a R39.90 monthly administration fee. Applicants are required to supply their latest pay clip or salary advice or a 12 months' bank statement if they are self employed. Obviously ID and details of the property are also required.

Home loans for foreigners

FNB has a home loan option it calls Foreign Choice that is designed for foreigners and South Africans now living abroad. The bank will finance up to 50% of the purchase price of a home in South Africa; the balance must be provided in form of "foreign funds". This means that purchasers will need to submit an Exchange Control application with the relevant South African authorities.

The Foreign Choice home loan option, like traditional home loans, is available to joint applicants and to individuals earning at least R15 000 a month. In addition to the usual fees connected with home loans, FNB requires a R650 non-resident fee and a reason from the foreign purchaser for buying property in South Africa. For example some people buy homes as an investment, to rent out, while others buy them to use as a holiday home. Individuals applying for the Foreign Choice home loan are required to supply an up-to-date statement of their assets and liabilities together with a banker's report from the country where they are living.

IslamicFinance home loans

FNB's IslamicFinance homes loans cater specifically for those of the Muslim faith who are governed by Islam's prohibition of the use of Ribe (or interest), which is of course normally part and parcel of any home loan agreement. The main difference between this type of home loan and the others is that there is an agency agreement (or Wakalah) contract through which all charges and fees are levied. There are also several exclusions, and no further loans, re-advances, building loans or the flexi facility are permission. Only First National Bank home loans above R240 000 are available from IslamicFinance, but there is an option to repay the loan over five, seven, ten or 20 years. A deposit is compulsory, and instalments are fixed for the full period of the loan and must be paid by debit order. The IslamicFinance home loan is not limited to the Muslim community, and all customers (who should be KYC – know-your-customer – compliant) are subject to the usual bank lending criteria.

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Johannesburg – In a market environment where banks' strict lending criteria are strangling the housing market, First National Bank (FNB) has taken the first step to make buying a house easier, by reducing its deposit requirements.

At the same time the bank has come up with a rapid sales plan for sellers under pressure, in which their houses are sold by an estate agent rather than on auction.

Other banking groups have not yet followed FNB's footsteps and are still keeping to their strict deposit requirements.

Sean O'Sullivan, head of sales and marketing at FNB's home loan division, says the bank currently requires a deposit of 5% of the purchase price and could possibly move towards requiring a 2% deposit.

The chief executive at FNB's home loan division, Jan Kleynhans, points out that considerations in determining the deposit include the quality of the suburb where the purchase is required and the market conditions.

In areas over which the bank has reservations a larger deposit may be required.

On Wednesday Luthando Vutula, managing director at Absa home loans, declared that Absa still requires a 15% deposit from Absa clients and 30% from other clients.

Standard Bank spokesperson Ross Linstrom notes that for new loans of up to R300 000 Standard Bank clients with a cheque account need a deposit of 5%, for loans of R300 000 to R2.5m a deposit of 10%, and for those above R2.5m a deposit of 20%.

FNB's new rapid sales plan involves the houses of sellers in financial straits being sold by appointed agents, so as to get the best price for the seller, instead of selling them on an auction where properties fetch 20% less.

For buyers of these houses 100% mortgage finance is available from FNB if they meet certain criteria. O'Sullivan explains this is in order to help buyers who have previously not had access to the market. The properties are valued by professional valuer and some 300 such properties are currently being sold a month.

Resource: Fin24.com

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