We expect the demand for home loans in South Africa to increase due to the economic conditions of the country. In addition, we also expect the number of homeowners who are selling under economic pressure to rise consequently. As a result, taking a home loan can be a wise decision considering the latest trend around commercial homeowners in South Africa.
A home loan could be what you need at the moment. But you might not know what to do to qualify for a home loan. There are requirements that a South African must meet to qualify for a home loan. What home loan is, the requirements, how much you need to earn, etc are all-inclusive in this article.
What is a home loan?
A home loan is the amount of money you borrow from any financial institution to buy a house. Home loans comprise adjustable or fixed interest rate and repayment terms.
What you must meet to qualify for a home loan in South Africa
There are some demands you must meet for lenders to give you a loan. This helps them know if you are trustworthy to repay the loan.
You must meet the following to qualify for a home loan in South Africa:
- Have an excellent credit history
- Be 18 years old and above
- Have a permanent employment for 6 consecutive months
- Self-employment not less than 2 years
What are the requirements for a home loan in South Africa?
When you meet with the above demands, lenders would want additional documentation from you. These documents will give the lenders additional information about you.
The following are the requirements for a home loan in South Africa
For salary earners:
- Provide the last three months’ bank statements for your personal account. Also provide that of your partner, if applicable
- Show the statement of your monthly income and expenses.
- You must provide your latest salary slip. Some lenders could ask for your last three salary advice if you earn commission.
- Show them a copy of your South African ID document
- Show your personal assets and liabilities statement.
- Get a copy of the purchase agreement
For the self-employed:
- Provide a letter of drawings. You can get this from your accountant. You must provide this because you do not earn salaries and can’t provide a salary slip.
- Submit your personal assets and liabilities statement
- Provide your business account bank statements (last 6 months)
- Show them your last two years’ annual financial statements (AFS)
- Provide the copies of your ID document
- Get a copy of the purchase agreement
How much do I need to earn monthly to buy a home in South Africa?
You would need heavy financing in order to buy a home on a single income. For that to happen, you need to earn a minimum of R15 000 per month after tax. Because of this, the lenders can offer you a home loan of around R500 000.
What are the pros of and cons of a home loan?
Before getting any form of loan, you ensure that there are benefits you can gain. However, there are also some cons that come with home loans.
The following are the pros and cons of a home loan:
The pros are:
- The interest rate of a home loan is lower than that of a personal loan
- Individuals can now purchase the homes of their own with a home loan
- The lender ensures the safety of the home you bought
The cons are:
- The repayment requires an enormous commitment for a long period
- It is risky, unforeseen circumstances can come along the way and hamper the repayment of the loans
- Continuous repayments of loans and interest rates can stop you from investing your money
Buying a house requires an enormous amount of money. Whether you are a salary earner, you could find it too difficult to buy a house. Because of this, consider a home loan for you to buy the house you dream of. There are various financial institutions in South Africa who can offer you a home loan. However, keep in mind the content of this article if you wish to apply for a home loan.