A home loan that covers the purchase price can make homeownership more accessible, especially for first-time buyers. But it may still carry expenses they have not budgeted for. Transfer fees, bond registration costs, and the ongoing costs of ownership all affect whether a purchase is affordable.

For South African buyers facing increased pressure as the cost of living rises, the practical question extends beyond securing home finance: what must be paid upfront, what will be added to the debt, and is the purchase actually affordable?

Understand What “No Deposit” Covers

A 100% home loan finances the full purchase price, subject to the bank’s approval and lending requirements. It does not automatically cover the costs of transferring the property or registering the mortgage bond.

Some lenders offer qualifying buyers finance above the purchase price to help cover transaction costs. These products have specific eligibility requirements, limits, and exclusions. Even where additional finance is approved, the buyer may have to fund a shortfall.

Financing these expenses reduces the cash needed at the outset, but adds to the amount borrowed. Interest is then payable on that additional debt under the loan agreement. Compare the interest rate, repayment term, and total repayment amount alongside any advertised fee discount.

Ask for an itemised quotation distinguishing transfer duty, conveyancing fees, bond registration charges and other expenses. Transfer duty is a tax, separate from the attorney’s fees. A property purchase that attracts no transfer duty can still involve legal and registration costs.

Compare Renting and Buying on the Full Cost

Comparing monthly rent with a bond instalment gives an incomplete picture. Ownership also brings municipal rates, insurance, maintenance and, where applicable, levies and special levies.

Before deciding, work through:

• The upfront payment: Establish which expenses the loan covers, which remain payable, and when payment is due.
• The monthly commitment: Include ownership expenses and test the budget against a higher interest rate if the loan has a variable rate.
• The likely holding period: Consider how soon a move or resale might be necessary, allowing for buying and selling expenses.
• The emergency reserve: Check whether money will remain available for repairs and unexpected household costs.

Buying allows an owner to build equity as the loan capital is repaid. However, property values can fall, and selling expenses reduce the proceeds available. Renting may provide greater flexibility while a household builds savings or establishes where it intends to live.

National rental and house-price averages cannot settle this decision. Compare similar properties in the same area, using actual rental quotations, purchase prices, and ownership expenses.

Apply for First Home Finance Early

First Home Finance is a once-off government housing subsidy administered through the National Housing Finance Corporation. The published household income range is currently R3,501 to R22,000 a month, with the subsidy calculated according to household income. Applicants must meet the programme’s full requirements, including citizenship or permanent residence requirements, and restrictions on previous homeownership and government housing assistance. Confirm the applicable criteria before applying.

The programme can support qualifying purchases or construction and certain acquisition expenses, including conveyancing fees and a deposit. Confirm how the subsidy may be used in the particular transaction rather than assuming it will cover every upfront expense.

Start through the official First Home Finance website. Check eligibility, complete the relevant assessment or application, and submit the required identity, income, and household documents. Confirm the current application window and funding notices before committing to payment deadlines. Meeting the income criteria alone does not constitute approval.

Make the Agreement Match the Funding

An accepted offer to purchase can create binding obligations. If the purchase depends on a home loan, additional cost finance, or a subsidy, ask a property attorney to ensure that the agreement addresses those dependencies and provides workable deadlines.

A finance condition must reflect the funding required. Before signing the offer, establish what happens if the bank approves less than expected, the subsidy is delayed, or transaction costs exceed the available funding. Resolving those questions before committing to a bond can prevent an accessible purchase from becoming an unaffordable obligation.

 

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.