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Advising first-time buyers

Despite the current cycle of interest rate hikes which always puts strain on home buyers, especially first-time buyers, Rhys Dyer, CEO of ooba Group shares that “Year-on-year property price growth in most provinces has slowed to rates well below inflation. This should improve the affordability of property as wages grow quicker than property prices. This coupled with the banks’ willingness to continue to approve home loans at attractive terms, makes investing in residential property an attractive proposition – especially for first-time homebuyers.”

It would seem that first-time buyers agree, with Gerhard Kotzé, MD of the RealNet Estate Agency Group reveals that 72% of all bond applicants are looking to purchase their first property, albeit at the lower end of the market – with Deeds office data indicating 80% of transactions fall below R1.5million.

Many of these buyers are getting home loans with Ooba’s statistics showing that the average approval rate on applications processed during Q3 2022 was 83.3% – up from Q3 2021’s 82,9%. Dyer goes on to say that 46.2% of home loan applications declined by one bank in Q3 2022 were approved by one or more of the others.

Advice to first-time buyers

Deposits are (still) key

For most people buying a property is the biggest financial decision they’ll ever make, and it can be daunting. While banks are currently offering 100% loans in many cases, putting down a deposit not only aids in securing the best possible interest rate, but save them money in the long run.

Jackie Smith, Head of Buyers Trust, recently illustrated this point for BusinessTech, comparing the monthly and total repayment costs of different deposit amounts on a R1.5 million home – rounded up from the national average purchase price of R1,431,712.

The following calculations are based on the average home loan period of 20 years and the current interest rate of 9%, using Ooba’s free online Bond Repayment Calculator:

Deposit on R1.5 million home Monthly payment Total payable Monthly saving (vs no deposit) Total saving (vs no deposit)
0% R13 496 R3 239 013 None None
5% (R75 000) R12 821 R3 077 063 R675 R161 950
10% (R150 000) R12 146 R2 915 112 R1 350 R323 901
15% (225 000) R11 472 R2 753 161 R2 024 R485 852

Ooba’s data showed that putting down a 15% deposit would save close to half a million rand over the long-term. When possible, it’s in the buyer’s best interest to put down a deposit.

Banks are offering first-time buyers discounts

First-time buyers may not be aware that towards the end of September Standard Bank launched it’s First-Time Home Buyer Campaign which will be running until the 21st of December 2022. Absa Bank also launched its new 105% First-Time Home Buyer Proposition launched on the 22nd of September, which enables first-time home buyers to apply for up to a 105% bond with a maximum purchase price of R1 800 000 and enjoy a 50% bond registration discount. More on these offers at the end of the article.

Build equity

Kotzé shares that, “We find that young people also have a much better understanding now of the need to build equity in their first home as fast as possible, so that even if they do have to sell in order to work elsewhere, or to accommodate a growing family, they have a good chance of doing so at a profit they can then use as a deposit on their next home. This has definitely boosted the demand over the past two years for smaller, less expensive ‘starter’ homes that can be paid off more quickly.”

It’s good advice to encourage first-time buyers to prioritise building equity – which will benefit them in both the shorter term (should they want to sell) and in the long run (decreasing their monthly repayments).

More on the Absa and Standard Bank first-time buyer campaigns:

Standard Bank First-Time Home Buyer Campaign

The Campaign Offering consists of an automatic 50% discount in the bond registrations costs and an opportunity for 5 lucky winners to have their outstanding home loan balance settled up to the maximum value of R1 million. To qualify, at least one of the applicants needs to be a first-time home buyer.

Qualifying Criteria:

  • New Loan applications captured (first time capture) during the campaign period between 21 September 2022 and 21 December 2022
  • The bond must be registered on or before 30 June 2023
  • At least one applicant should be a first- time home buyer
  • The loan amount does not exceed R3 million

Terms and Conditions:

  • Qualifying customers will automatically be entered to the draw, subject to the bond being registered on or before 30 June 2023
  • Should the client wish to access the funds they will need to open a Standard Bank transaction account and apply for an AccessBond
  • All grants that meets the campaign conditions will be allocated based on the current Attorney allocation tool
  •  If the Campaign Attorney discount is accepted, any other campaign with Attorney discount will no longer be available to the customer
  • New Developments will not qualify for the 50% attorney discount as the costs are already built into the purchase price, however, will still be eligible for the cash prize draw
  • Draw date anticipated for 1 August 2023
  • The customer could qualify for 105% LTV up to a maximum of R1.8 million

Campaign Exclusions:

  • Vacant land only
  • Juristic entities
  • Business mortgages
  • Small Holdings
  • Non-Residents and Foreign Nationals
  • Staff Loans

Campaign Inclusions:

  • Building Loan Packages in New Developments, Sectional Title Units and Freehold Properties will qualify

Absa Bank First-Time Home Buyer proposition

Absa Bank’s new 105% First-Time Home Buyer Proposition launched on the 22nd of September and first-time home buyers can now apply for up to a 105% bond with a maximum purchase price of R1 800 000 and enjoy a 50% bond registration discount.

  • 105% Home loan definition expansion: First Time Home Buyer can apply for up to a 105% bond with a maximum purchase price of R 1 800 00
  • Attorney discount: 50% Bond registration discount for all first-time home buyers
  • The new MyHome income band has been adjusted: All first-time buyers earning less than R27 200 (gross monthly income), will have free access to borrower education homeownership training (also available digitally)
  • Conditional Concession offer of 0.25%: All first-time buyers will receive an additional -0.25% concession on their variable interest rate on condition that they:
    • Open a new Absa cheque account (Gold Value Bundle or Premium Banking Account or Private Banking Account), and load their home loan debit order against the Absa transactional account, and
    • Deposit at least R3 000 into their Gold Value Bundle or Premium account or R35 000 into their private banking account monthly, and
    • Keep the home loan account up to date
  • Customer earns between R3 501 to R22 000 as single or joint gross monthly household income, may be eligible for a government housing subsidy under the Finance Linked Individual Subsidy Programme (FLISP)

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