Why saving for a deposit could be the smartest money move of the year

Posted On Monday, 22 February 2021 15:25 Published by
Rate this item
(0 votes)

Buying a home is probably one of the most important - and expensive - purchases many people will make.

Carl_Coetzee_BetterBond_CEO

It usually requires a long-term financial commitment in the form of a bond to cover the cost of the home. While most buyers have an idea of how much they can afford to pay each month towards their bond, few realise the importance of putting down a deposit when applying for finance.

According to Carl Coetzee, CEO of BetterBond, a deposit will make a significant difference when it comes to banks deciding whether to approve or decline a bond application. “BetterBond applies to multiple banks on the buyer’s behalf, to secure the most competitive lending rate. A deposit - even if just 10% - will go a long way to securing a better interest rate. Banks certainly look more favourably at an applicant who appears to be a lower lending risk, and paying a deposit suggests that the applicant is able to manage their money.” It also counts in a buyer’s favour when negotiating with a seller, says Coetzee. “Being able to put down a deposit signals intent. Sellers are more likely to consider an offer if they are dealing with a serious buyer.”

Being able to offer some form of deposit will  also have an impact on the gross household income required to qualify for a bond. For a R2 million property, the gross monthly income required for a bond at the current prime lending rate of 7% is almost R52 000. By putting down a 10% deposit, the monthly gross income required for a bond on this property drops to around R47 000, and reduces the monthly bond repayments by just over R1 500. 

The following table shows the potential savings when paying a 10% deposit on a R1 million home, with a prime lending rate of 7%,  8% and 9%. 

Last modified on Tuesday, 02 March 2021 15:30

Most Popular

Repo rate unchanged at 3.5%

Mar 25, 2021
Lesetja_Kganyago_SARB_Governor
The Monetary Policy Committee has decided against altering the repo rate, deciding to…

Park Village Auctions brings to market a well Designed Factory with Offices

Apr 05, 2021
Default Image
Park Village Auctions brings to market a well Designed Factory with Offices

The Business Exchange announces new Dollar-based investment opportunity for South Africans

Apr 06, 2021
David_Seinker_CEO_The_Business_Exchange
Serviced office space provider The Business Exchange (TBE), in partnership with Maxcity…

Growthpoint completes Cintocare Hospital development - the first of its kind for Africa

Apr 06, 2021
Street view of the Cintocare Hospital
A 11 000 sqm specialised surgical hospital development by Growthpoint Properties (JSE:…

Absa partners with Amdec Group to bring iconic Harbour Arch development to fruition

Mar 30, 2021
Harbour _Arch_Context
Absa Bank has partnered with Amdec Group, South Africa’s leading developer of new urban…

Please publish modules in offcanvas position.