38% of bank approvals are currently subject to a lower offer – there is therefore an increasing need for homebuyers to have a deposit available for a successful application. The approval and ultimate conversion rate on a 100% bond application are significantly lower than a 90% or lower bond. You stand a considerably better chance of your bond being approved if you can put down a deposit. The size of a deposit affects the banks’ scoring of an application and the interest rate at which the application will be approved. With the current trend of banks approving home loan finance at lower offers, there is an increasing need for homebuyers to have a deposit available.
Sources of Deposit:
- Profit from the sale of an existing property
- Raise a bond on an existing unbonded property
- Utilisation of access facility on an existing bond if property not sold
- Personal Loan
- Utilisation of funds saved
- Redemption of Investment funds
- Pension-backed Lending
- Selling unwanted and unused goods
- Borrowing funds from parents
- Gift from parents
- Cession of ABSA Fixed Deposit for applications qualifying under the new ABSA Springboard offering
The following benefits to putting down a deposit should be considered:
- A more competitive interest rate on your home loan – the bigger the deposit, the lower your interest rate will be.
- A lower interest rate will reduce your monthly repayments on your home loan, making the loan more affordable.
- You can pay off the loan faster – saving thousands of Rands and years off the lifespan of the mortgage.
You will immediately have equity in your property, which could act as a buffer if there is a drop in the value of the property due to property market conditions.
