They are not easily secured, but about 40% of homebuyers are still being granted no-deposit or 100% home loans – and in some instances loans that cover not only the whole purchase price of their new home but their transfer fees and bond registration costs, too.
These fees, including transfer duty (where applicable), bond registration charges and legal fees, currently work out to between 4.5% and 5.5% of the purchase price.
However, while these loans, which are mostly granted to buyers in the affordable homes sector, may come as a relief for those tight on cash, explains Shaun Rademeyer, CEO of BetterLife Home Loans. There’s always a risk involved in borrowing more than a property is currently worth.
“The problem is that for almost five years, the loan capital will hardly diminish for the homeowner able to make only the minimum monthly payments. What that means is that if the owner is for any reason forced to sell within that period, he or she might actually have to pay in a lot of cash to clear the loan and any accumulated interest.
“The buyer who puts down a good deposit and uses cash to pay the transfer costs will usually be able to negotiate a lower interest rate – and will immediately start building equity in his or her home,” says Rademeyer.
