Is it possible to get a 100% home loan in South Africa?

What is a 100% home loan?

A 100% home loan covers the entire buying price of your house. This type of home loan ensures that you get the total bond amount without paying down a deposit. Usually, when you consult about approaching the bank to apply for a mortgage to buy your first house, you hear a lot more about whether you have the deposit amount or not. As such, many people do not know about the possibility of getting a full home loan in South Africa without paying a deposit. But it is possible.

What banks give the full home loan in South Africa?

All banks can give you a 100% bond in South Africa. However, whether you get it or not depends on various factors. These factors are all about you, the applicant. Your financial status must meet the bank’s pre-conditions, and you should have an impeccable credit record. In other words, as long as you want it and the bank is comfortable that you can easily pay back their money, you will get the total mortgage.

Is a full bond good for you?

Debt has its pros and cons, and this all depends on how you handle it. Given that a home loan is another form of debt, you must also consider some factors that affect you before concluding whether any type of debt is good for you.

As such, it is imperative first to understand that a 100% bond means you get a higher debt amount than the person who paid a deposit for the same priced house. For example, if you and your friend want to buy similar homes that cost R1 million. By getting the entire bond, you immediately owe R1 million to the bank. But if your friend decides they want to pay a 10% deposit, they directly reduce their debt to R0,9 million. This can be a huge difference some few years down the line, given the interest paid on the monthly mortgage installments.

Given the above, it all comes down to personal preferences and financial standings. For some, an entire home loan is an ideal choice. But some prefer to pay down a deposit. In order to answer whether a full home loan is good or bad on a personal level, you must consider the following;

  • If you pay a deposit, banks may see you as someone serious about your intention to own a home; hence they will give you the loan.
  • If you pay the deposit, banks may see you as someone able to pay monthly installments plus interest, placing you as a positive applicant.
  • By applying for an entire home loan, you may be telling the bank that you do not have enough money to pay a deposit, which may result in you paying high interest rates on the home loan – if the bank decides to give you the loan.
  • By applying for the entire loan, you may show the bank that you failed to save enough money for the deposit, which could be a red flag.

Overall, even though not paying a deposit on your home loan could be tempting, it usually does not work in your favor.

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