100% Home Loans in South Africa

There are so many conflicting reports these days as to which banks offer 100% home loans and which don’t.

Let me clear that up for you. Just keep in mind that sometimes it depends if you also have your personal bank account at that bank or not.

Absa Home Loans - On home loans of under R1.5 million, maximum loan of up to 90% if the applicant with the biggest salary banks there. Maximum 70% if you don’t bank there.

If you earn under R15 000 per month (joint or single income) you can qualify for up to 110% loan – this means no deposit, PLUS all your attorney fees are covered.

Standard bank Home Loans – On home loans of under R2.5 mil, a maximum loan of up to 90% – Standard Bank have advertised that they offer 100% home loans if you work directly with them and not through an originator, but I have yet to hear of more than 1 client confirming that they got a 100% loan from Std Bank.

Under R15 000 income you can qualify for up to 104%, which is also the full purchase price plus costs.

FNB Home Loans – On home loans of under R2 mil up to 100% loans. If your income is under R15 000 you can also qualify for a up to 104% home loan

Nedbank Home Loans – up to 100% home loans if the purchase price is under R3 mil.

SA Home Loans – 95% home loans for purchases.

They also have a new offering of a 90% home loan with interest only for the first 3 years. This means better house – for the same instalment. So you get the home you really want. With EDGE, clients pay the lowest possible instalment – the interest only – for the first 3 years, then revert to a standard loan for a further 20 year period. This makes it ideal for clients who want to buy up now, knowing their income will grow to match their repayments.
 

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Johannesburg – Despite banks claiming to offer 100% home loans, potential buyers are still left out in the cold by stringent lending criteria, said South Africa’s biggest mortgage originator on Wednesday.

Such home loans have been offered by the “Big Four” banks since August 2009, but according to  mortgage originators banks are still reluctant to grant them.

“While the granting of 100% home loans is a sign of confidence in the local property market, the implications of the National Credit Act mean that consumers still have to meet the strict affordability criteria in order to qualify,” said Saul Geffen.

Statistics show home loan applicants are taking advantage of the banks’ offer – 44% of potential homebuyers are applying for 100% bonds, up 18% from three months earlier. However, the approval ratings on these bonds are significantly lower.

“This [100% loans] is a thing of the past,” said Jacques du Toit, Absa’s senior property analyst. You have to take into account broad economic situation.”

According to Du Toit, the job losses, consumers’ high level of debts and the drop in income mean that many home loan applicants can’t afford houses.

“The banks carry the risk – not the agent or the buyer, that’s why they have to be extra sure that the applicant has the ability to pay,” said Du Toit.

Statistics also showed there has been a 10.5% drop in the average bond size from R707 760 in December 2009 to R633 467 in January 2010.

For more info on Home Loans go to www.mortgagepluscc.co.za or call us on 011.327.4489

The long awaited upturn is here, evidenced by a loosening in home loan lending criteria from the banks. Deposits may well become a thing of the past instead of the 100% home loan, which has made a comeback for certain clients that meet the criteria. In addition, the four major banks have renewed their contracts with mortgage originators, which bodes well for the future success of the industry as a whole.

A recent Ernst & Young survey indicated the net percentage of local banks applying stricter lending criteria for businesses declined from 87% in the first quarter to 72% in the second quarter. A further decline to 61% was expected in the third quarter.

Dr Prieur du Plessis, executive chairman of Plexus Group – an independent investment house, said that for households, the net percentage of local banks applying stricter lending criteria dropped a mere 1% – from 86% in the first quarter to 85% in the second quarter. This figure is expected to be 75% for the third quarter. “A lowering of lending criteria is usually closely linked to the Reserve Bank’s repo rate,” said Du Plessis. “However, the sharp cuts in the Reserve Bank’s rate have had little effect on banks’ lending crit eria until now.” Defaults by borrowers decrease when interest rates fall and the benefit is passed on to them.

But du Plessis said that households are currently struggling so much they are inclined rather to incur debt. “Although recent Reserve Bank statistics reflect that credit card usage continues to decline, loans and advances by commercial banks have increased,” he noted. “The lowering of lending standards will undoubtedly have a positive effect on consumer sentiment. It should also confirm the bottoming of house prices.” Feedback from the facilitators Commenting on the South African banking industry’s attitude towards mortgage originators in the country,

Deon Lessing , says that due to the worldwide recession, mortgage originators were obliged to lower commission structures in order for their contracts with banks to be renewed. Business models had to be realigned in order to remain profitable. Overall, Lessing is of the opinion that the role of the mortgage originator will never become extinct. “The fact that all mortgage origination contracts have been renewed shows that South African banks value the quality of service we provide,” he said. Mortgage originators are structured in such a way as to successfully facilitate and streamline the home loan application process. “We have some of the best technology and systems in place, enabling us to easily meet clients’ and banks’ specific needs,” said Lessing, adding that, more than ever, banks are geared to accept bonds via the mortgage origination channel. Lessing, however, noted that liquidity is still tight; therefore banks’ interest rate discounts on loan or credit products will remain low. He said that the financial institutions are recognising the return of value to property. “This is evident by the reassessment of loan-to-value ratios and the granting of 100% home loans.”

Saul Geffen, said that the main contributor to the significant drop in average deposits as a percentage of purchase price is a result of the shift in banks’ lending criteria to lower deposit requirements, with all four big banks now offering 100% loans.

States Geffen: “The improved appetite to lend will support the increased demand for property as transaction volumes continue to pick up.”

He said one of the biggest drivers of a market recovery is bank lending and noted a marked improvement in competitiveness between the banks over the past five months and an increase in approval rates. “Banks are now targeting non-bank clients and rate concessions are becoming more aggressive.”

Richard Gray said they welcome the more relaxed bank lending criteria. “It is one of the key pieces in the puzzle needed to ensure a recovery of the property market. There is a huge demand for home finance and any relaxing of lending criteria by the banks will help meet the demand.” Expects said the banks to still be conservative in their lending policies, and believe that loans without any deposit from the home loan client will not be commonplace. “Most clients will need to still be able to pay a small deposit,” Gray said.

The basics from the banks

Standard Bank has recently increased its risk acceptance rate in its Home Loan and Credit Card divisions. The changes made to Standard Bank’s risk appetite have been specifically designed to benefit first-time entrants into the housing and general credit markets. Peter Schlebusch, Chief Executive, Personal and Business Banking, Standard Bank South Africa, said: “It is important that we support and provide access to finance to the lower end of the economic spectrum. People in this sector have been hardest hit by higher inflation, job losses and the general slowdown in the economy. Standard Bank is committed to providing access to finance and financial services to the low-income market, while continuing to focus on prudent risk, capital and liquidity management.”

FNB chief executive Michael Jordaan has forecast improved economic conditions in 2010 and a relatively slow recovery; quite unlike the explosive growth that took place in 2005 and 2006. The residential property market is likely to remain subdued for some time to come,” added Jordaan.

Clive van Horen, Head of Secured Lending said: “We believe that the outlook for house prices has improved enough for us to relax our deposit requirements. For low-risk clients – both existing Nedbank clients and clients who are new to the bank – we will lend up to 100% of the purchase price of their new homes. In general, though, we continue to believe that putting down a 5 – 10% deposit is good practice for both the client and the bank, and therefore we will continue to encourage clients to do likewise.”

Luthando Vutula, Managing Executive of Absa Home Loans, said the turn in the economic cycle is becoming evident and as such, they need to review their customer offerings. “Although the South African economy still finds itself in recession after contracting for three consecutive quarters up to mid-2009, it is important to note that to date, the interest rates have been reduced by 500 basis points since December 2008 and are projected to drop by a further 50 basis points later in the year.

“Essentially, this means that consumers are experiencing relief, and with lower inflation and household payments there should be a notable reduction in loans in arrears. In light of this, and a slight improvement in property market, our loan-to-value caps will be aligned with the prevailing market conditions.”

Vutula said it is important to note that the normal lending criteria will still be taken into account.

While many may be surprised at the quick comeback of the 100% bond, the general consensus is that home loan criteria has been adjusted in line with current market trends and is expected to boost the property market activity. The banks, however, are still keeping an eagle eye on credit, and promote responsible debt management among customers.

To apply for your Home Loan please phone us on (011)327-4489

www.mortgagepluscc.co.za