Following on from our August guide, we’ve put together more information to help you navigate the process of buying a house in South Africa. We understand that buying a home is an extensive undertaking, and we want to make sure that we arm you with as much knowledge as we can.
You’ve found the perfect home… now what?
At this point, you should have calculated what you can afford, and factored it into your house hunting decision. If you haven’t, refer to our last blog which includes links to bond calculators.
Find out your credit rating
Do you know your credit score? You’re now at the stage of applying for a home loan. What lenders will check before offering you a home loan, is your credit score rating, and a good credit score is one of the most valuable assets a home buyer can have. Home loan lenders, which will most likely be a bank, will look at your credit score to determine if your past debt repayment behaviour makes you low or high risk. Your credit score is determined by a credit bureau and will be a three-digit number of between 0 and 999. The higher the score, the better your rating.
What affects my credit score?
There are four main credit bureaus in South Africa: Experian, TransUnion, Compuscan and XDS.
They look at your financial history over the last six years:
- Account payments – your score will be lowered by:
- Missing payments
- Late payments
- Debt – if you have less than 65% of your available credit facilities available, or too much credit available, it can lower your score.
- Blacklist – if you’ve had a court judgement and have been blacklisted, it can have a massive knock on your credit score.
- Credit history – if you’ve had credit for less than six years, or indeed, no credit at all, this can also affect your score.
- Applications – if you’ve applied for too many new accounts, or applied for an account and been rejected, this may have a negative impact on your score.
South Africans are entitled to a free copy of their credit record every year, and you can get this via each of the bureaus directly, or use a website that looks at your score across the bureaus, such as Credit Bureau.
Scoping out home loan lending institutions
You probably have your preferred bank, but are they the right lending institution for your home loan?
With so many different bond options available, the choices can be overwhelming. It’s often easier to use a home loan comparison service that works with all the leading banks and lenders to secure you a home loan, such as ooba, BetterBond and Get@Bond. As these companies receive a fee from the bank, there is no cost to you to use their services.
The interest rate offered to you will all come down to how much of a risk you are. The biggest factor, as we detailed above, will be your credit score. Another consideration in determining your interest rate will be the size of deposit you can offer. The bigger the deposit you can put down on a house, the less of a risk you are likely to be and this will be reflected in the interest rate offered to you.
There are a number of documents you will need to have ready and available for your bond application:
- A copy of an offer to purchase (if applicable) including the property details.
- Proof of income – single or joint, depending on the type of home loan you are applying for.
- Salary
- Or business income if you are self-employed:
- Audited Financial Statements, Founding Statements, and Memorandum of Articles of Association, will be required to evidence your earnings from your own business.
- Suitable proof of residence.
- Copy of your ID.
- Copy of marriage certificate (if applicable).
- 3 months bank statements.
- An onsite inspection – the bank will verify the value of the property by appointing an agent to inspect the property.
Don’t lose hope if your initial application is rejected. There are plenty of lenders out there, and even without a deposit, there are lots of home loan application options.
You can obtain a bond pre-approval, in the price range that you’re looking at, when you’ve decided that you are ready to make an offer.
Create an offer to purchase
Once you’ve found the perfect home, you don’t want to lose the chance to buy it while you go through the rigmarole of securing the home loan. Declare your offer by letting the seller know you are interested in purchasing the property.
This is the point at which you’re ready to sign an offer to purchase. An offer to purchase is the document governing the sale agreement of a property, and stipulating the terms and conditions, signed by both you and the seller. Note, it is a legally binding contract, however, the conditions of the sale usually specify that only once the bank has approved your loan, does your offer become valid.
Pay close attention to what you’re signing, and especially the conditions of sale, occupation date, deposit, the 72-hour clause (which allows the seller an additional 72 hours to look for other potential buyers), fixtures, and the length of time given to you to secure the bond.
Although the seller is legally obligated to disclose any known defects in the building, your offer to purchase should specify that a home inspection is required. This is really important, as it is your chance to unearth any existing defects. The good news is that if the inspection does uncover any issues, the seller is liable for them for three years after the defects have been discovered.
What are the other fees associated with the buying process?
As the buyer, you will be responsible for the following fees:
- Conveyancing – although the conveyancing attorney is appointed by the seller, the purchaser is responsible for their fees. Conveyancing fees are recommended tariffs, on a sliding scale, based on the value of the sale transaction.
- New bond registration – this will be determined by the bank when you apply for the home loan. Not all banks will charge this.
- Transfer duty – this is the legal tax payment to SARS. The conveyancing attorney will require this from the purchaser and will make the payment to SARS, based on the current tax tables and the final offer to purchase value.
The final steps before you own your new home
- Your home loan must be secured and bond documents from the bank must be signed.
- You must provide the seller’s conveyancing attorney with all requested documentation:
- Identification Documents
- Marriage Certificates and Antenuptial Contract, where applicable
- The bank’s conveyancer and seller’s conveyancer will communicate to organise the bank’s guarantee.
- The conveyancer will draw up all required documentation to move forward with the registration of the property into the new owner’s name.
- A Rates Clearance Certificate will be obtained from the relevant municipality, to certify that the seller does not owe any money in respect of their charges. The seller will clear any outstanding charges through the conveyancer.
- The conveyancer will lodge the transfer in the Deeds Office, providing the following is all is in order:
- SARS Transfer Duty Receipt
- Municipal Rates Clearance Certificate
- Buyer’s bond documents
- Cancellation of the seller’s existing bond
From there, the registration will be achieved within 7 to 10 working days and, once the property has been transferred to your name, you are the lawfully registered owner.
Good news when buying a brand new Mooikloof home
There is no transfer duty to pay when buying one of our new build properties. Your home is brand new and ready to move into, with no painting or decorating to worry about. You can simply take the keys, unpack and relax in your new home.
We are currently in the second phase of our Mooikloof Country Estate development, and our two and three-bedroom units in our gated, secure estate, are selling fast.
Mooikloof Country Estate will be home to 1,000 units, ranging from free-standing houses, to apartments, and a retirement village. Contact us today for more info.
