select
|

Paying a deposit - what are the benefits?

Naturally no-deposit or 100% home loans do make it easier for young buyers and first-timers to get a start in the property market, despite the withdrawal of such loans in 2009, they are steadily making their way back into the market, especially for the purchase of lower-priced properties.
 
Shaun Rademeyer, CEO of BetterBond Home Loans, SA’s leading origination group has been quoted as saying that their last statistics show that the percentage of loans being granted for the full purchase price has actually fallen to 39% now from the 41% two years ago, and the figure is still trending downwards.
 
He says that this is due to the reaction on the part of the lenders to the recent contraction in the economy and the growing employment uncertainty on the part of the consumers. Adding that this further underlines the fact that it is always preferable for homebuyers to pay a deposit if they can.  

For example - if someone with a new 100% home loan were to suddenly lose their job, and had to sell their home in a hurry, there would be selling costs and agent’s commission to pay as well as the 100% loan to repay. This would mean that they could quite easily end up owing more than the sale price of their property. 
 
“The buyer who had paid a 10% or 20% deposit would obviously be able to cope much better in this situation – and it is worth noting that those who put down a deposit are also typically granted their loans at a lower rate of interest, which makes it easier for them to keep up with monthly repayments when times are tough.”
 
In addition, Rademeyer notes, those who save up a deposit before buying will save a significant amount on the total cost of their home over the loan period.
 
“For example, a R650 000 home bought with a 100% loan at 10,25% (prime plus 1%) would cost a total of more than R1,53m over 20 years. The same home bought with a deposit of R65 000 and a 90% loan would cost a total of about R1,38m.
 
“That is a saving of more than R150 000 - a pretty good return on the R65 000 that the homeowner ‘invested’ as a deposit. And it is likely to be even better if the buyer is able to secure a better interest rate by paying that deposit.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    • 15 Feb 2018
      One positive consequence of the financial crash in 2008 was the rise in consumerism, especially in the property market, where buyers have steadily become more knowledgeable and more value conscious.
    • 15 Feb 2018
      While most homeowners will take the agent’s commission into consideration when they are trying to determine what the will get out from the sale of their property, many often forget to factor in the other costs involved in a home sale, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 14 Feb 2018
      The forecast for the national rental market in 2018 remains a mixed bag of good news and bad news. Although rentals are expected to rise slowly as the challenges of home affordability and tighter lending criteria tighten their grip, it’s a double-edged sword as the market also will come under increasing pressure from factors like declining disposable income levels.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK