Mortgages in South Africa
South Africa is a great place for UK residents to purchase property, as the country is a former British colony, so English is widely spoken there.
The property prices are also quite low when compared to the UK, so if you’re looking to purchase a holiday home, want to increase your property portfolio, or want to emigrate, South Africa will be great for you.
Unfortunately, applying for a South African mortgage can be a complicated process that requires expert advice. Thankfully, that is exactly what we provide here at Loan Corp.
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Can foreigners get a mortgage in South Africa?
There are very few restrictions regarding who is able to get a South African mortgage, which makes it great for those looking for a holiday home.
You will easily be able to get a mortgage in South Africa as a foreigner, whether you are a resident or not, so long as you meet the rest of the eligibility requirements which will be covered in more detail later.
What types of mortgages do you get in South Africa?
The mortgage market in South Africa is well-equipped, which means you’ll have a variety of different mortgage products to choose from.
While this can be overwhelming, getting mortgage advice from a company like Loan Corp can ensure you get the best deal and value for your money.
Fixed-rate
When considering South African mortgages, the first thing you will need to decide on is whether you want your interest rates fixed or variable.
A fixed-rate mortgage will ensure that you are charged the same amount of interest on your loan for the duration of your mortgage contract.
While fixed-rate mortgages are less common, they are generally the more sensible option, as a fluctuation in the interest rate won’t affect your mortgage.
Variable rates
South African lenders more commonly offer variable-rate mortgage products, but these aren’t always a great option.
If the interest rates drop, you won’t have to pay as much interest on your loan; however, if the interest rate increases, you will end up having to pay more interest than you originally planned to.
Interest-only mortgage
Interest-only mortgages are rather strange loans that only require you to pay the interest that accrues on your mortgage over your loan term.
Once your term is over, you will then need to pay back all of the borrowed capital in full. This will only be a good option if you have a significant amount of capital available to you.
Repayment mortgage
Repayment mortgages are basically the same as the mortgages you can get in the UK, as your monthly payments account for both interest and the capital you borrowed.
This means you will not have any outstanding funds at the end of your term, and the property will then belong to you.
What are my borrowing options?
If you are considering signing up for a South African mortgage, then you might be wondering what your borrowing options are.
It would likely be a good idea to consult with a mortgage broker, or a company like Loan Corp, as we will be able to advise you which lender will be best for you.
We will list and discuss them below:
UK lenders
It is, unfortunately, impossible to get a mortgage for a South African property from a UK lender.
Remortgaging a UK property to purchase a South African property
While getting a mortgage for a South African property from a UK lender is not possible, there is a way around this.
You can remortgage your home in the UK and use the capital to purchase your South African property in cash. This means you’ll only have to worry about paying for a mortgage in the UK.
Unfortunately, this option will not be suitable for everyone, as you’ll need to either own your UK property outright or owe very little on it; otherwise, you may not be able to afford your monthly mortgage payments.
South African banks
As a foreigner, you can easily apply for a mortgage from a registered South African bank. Some of the South African banks that act as mortgage lenders to foreigners in South Africa include Absa, FNB, and Standard Bank, which are the three biggest banks in the country.
Any home loan you apply for in South Africa will also need to be approved by the South African Reserve Bank before any money changes hands.
If you are a foreigner who doesn’t intend to work in South Africa, then you will also need to pay a much heftier deposit to secure a South African mortgage bond.
What are the eligibility criteria for a mortgage in South Africa?
As with applying for any loan, if you are applying for a mortgage, you will need to meet certain eligibility criteria to be granted credit.
We have listed some of the criteria that you will need to meet below if you want to be eligible for a South African mortgage.
Deposit
If you want to purchase a property in South Africa as a foreigner, and don’t intend to live or work there, then you will, unfortunately, need to pay 50% of the purchase price of the property upfront.
If you have a work permit or become a resident, then you won’t need to fork out as much, but this is an important factor to consider if you are planning on buying property in South Africa, as this differs greatly from a UK mortgage.
Affordability
One of the most important things for mortgage lenders to consider when loaning people money is whether they’ll be able to pay it back within the term.
In South Africa, if you want to be eligible for a mortgage, then your outgoings must not exceed 35% of your gross income. This is a policy that many countries around the world seem to have, although the exact number may differ from lender to lender.
Credit score
Any bank or institution lending you money will want to know what your credit history is like, as they will want to make sure that you’ll be able to pay back the money you have borrowed.
Having a good credit score will give you access to more lenders with better interest rates and will make it much easier for you to secure a South African mortgage.
While having bad credit will definitely work against you, you will likely still be able to find a few lenders that will offer you a mortgage; however, it will likely be with a very high-interest rate.
What is the mortgage process in South Africa?
When you go to apply for a mortgage in South Africa, there are some documents that you will need to bring along with you.
- Photocopies of your passport (and the original)
- A South African Reserve Bank certificate
- Pay slips, bank statements, an international credit check, or any other documents that can prove that you’re worthy of credit.
- Utility bills from the property you are looking to purchase to show you can afford to stay there.
We have also laid out the steps regarding how to go about getting a mortgage as a foreigner in South Africa.
- The first thing you should do if you want a mortgage in South Africa, is consult with a company like Loan Corp, as our mortgage brokers can help you figure out which deal will be best for you.
- You can then choose the mortgage product that suits you best and find a local property lawyer to help with the transaction.
- Hand in your paperwork and find out what amount the bank is willing to lend to you for your mortgage.
- Choose a property that suits your budget, and make an offer to the seller.
- Pay your deposit to the bank to secure your property, and then set a completion date after consulting with the seller.
- The bank will then pay the rest of the property value over to the seller, and you will become responsible for the mortgage.
FAQS
How long is a mortgage in South Africa?
When you apply for a mortgage in South Africa, you’ll be able to choose between a 20-year term or a 30-year term.
A 30-year term will give you lower monthly repayments with more interest, while a 20-year term will give you higher monthly payments with less interest.
What deposit should I put down for a home in South Africa?
If you are a South African resident, you will only need to put down between a 10 and 20% deposit. However, if you are a foreigner wanting to buy property in South Africa, you will normally need to pay a 50% deposit.
Is it a good time to buy property in South Africa?
Yes, property prices and interest rates are currently very low in South Africa, so buying a property in South Africa at the moment would be a good investment to make.
Get Mortgage Advice From Loan Corp Today
If you are interested in purchasing property in South Africa, then you should be able to benefit from some expert advice.
Thankfully, that is exactly what we provide here at Loan Corp, so contact us now so we can help you find the best mortgage offer around.