19 Jul 2013
Prospective homeowners that save for a deposit are not only more likely to obtain a loan, but can also benefit from a better interest rate, which will save them considerable amounts over the term of their bond.
“For many owners your home will be your biggest asset, so the more it can work for you and help you create wealth, the better. This starts as early as when considering buying a property and saving for a deposit,” says Ewald Kellerman, Head of Sales at FNB Home Loans.
Around half of all new home loan applicants are for 100% loans, which means that the applicant does not have the intention of putting a deposit down. First-time buyers are least likely to have a deposit available and they are increasing in prominence. According to the FNB 2013 Q2 Estate Agent Survey 22% of new buyers are first-time home buyers.
However, putting down a deposit, even a minimal amount can greatly benefit a home buyer as people who demonstrate the ability to save are typically considered lower risk by the banks.“Saving for and putting down a deposit on a home loan is a very good way of saving for the future,” says Kellerman. “There is no ‘right’ amount for a deposit, banks typically ask for anything from 10% to 20% deposit. However, if you are unable to afford such a high amount at the time, even 5% is better than no deposit at all.”
One should also take into account that there are many other costs to consider when buying property like transfer duty, registration and initiation fees.
“We find that many customers who have saved additional funds or have a surplus after selling their previous property still apply for a 100% bond with the view to deposit the additional funds after the bond is registered,” says Kellerman.
While depositing funds after registration will bring down the capital and reduce the amount of interest charged to the bond, it is not the most effective way to use your savings; it is far more beneficial to put down a deposit for a bond upfront.
New homeowners need to realise that owning a home can be expensive in different ways.
“Rates, taxes and general maintenance on a larger freestanding house add up quickly and can sometimes end up getting to the point where it is no longer affordable,” cautions Kellerman.
First-time buyers seem to be much more interested in higher density units where some of the communal costs are shared while a number of existing owners are scaling down to save on the increasing running costs of a property.
“Many homeowners scale down later on in life to access some of the capital saved in a property. This enables the funds to be reinvested somewhere else for better returns or help to top-up a retirement fund. Our 2013 Q2 Estate Agent survey estimates downscaling due to life stages makes up 21% of all residential property sales,” adds Kellerman.
July is National Savings month and there are other ways you can use your home loan to save.
Tips for savings with a home loan
Apartment / Flat for sale in Eastleigh R 690 000
House for sale in Paradise Beach R 785 000
House for sale in Parsonsvlei R 695 000
Apartment / Flat for sale in St Georges Park R 495 000
House for sale in Buccleuch R 590 000
Commercial Property for sale in Lynnwood R 60 900 000
House for sale in Harmelia R 1 350 000
House for sale in Eden Glen R 3 550 000
House for sale in Bram Fischerville R 370 000
House for sale in Sarepta R 520 000
If you are using Internet Explorer 8 or higher, please verify that your Internet Explorer compatibility view settings are not enabled.
For the best browsing experience update to the latest Version of Internet Explorer or try out Google Chrome or Mozilla Firefox.
Please contact our Customer Service Centre for further assistance. Tel. +27 (0)861 111 724