Money

Do I need a deposit to buy my first home in South Africa?

Often not. 100% bonds are common in this market, especially on new developments, so plenty of first-time buyers start with R0 down. A deposit still lowers your monthly repayment and can earn you a better interest rate.

Often not, and this is the single biggest misconception we deal with. A lot of people put off buying for years because they are saving toward a deposit they may not need. 100% bonds, meaning the bank lends the full purchase price, are common in South Africa right now, particularly for first-time buyers and particularly on new developments.

Why banks lend the full amount

Banks compete for first-time buyers, because a first bond is usually the start of a long relationship. Government has also pushed hard to widen access to home ownership. The result is that a solid income and a clean credit record often matter more than cash in hand.

New developments help further. There is no transfer duty, which is the government tax on buying an existing home, and the developer usually builds the remaining costs into the price. So the cash you need on the day can genuinely be close to nothing.

So why put down a deposit at all?

Because it buys you two things. First, a smaller bond and therefore a smaller repayment, every month for twenty years. Second, and this is the part people miss, a better interest rate. A deposit lowers the bank's risk, and banks price risk. Even a modest deposit can shift your rate, and on a twenty year bond a small rate change is a large amount of money.

• R50 000 down on a R750 000 home cuts roughly R500 off the monthly repayment.
• It can also improve the rate you are offered, which compounds that saving.
• It gives you a little equity from day one, which matters if you ever need to sell sooner than planned.

What you should keep instead

Here is the advice we actually give: do not empty your savings into a deposit. Moving into a home costs money that has nothing to do with the bond. Connection fees for water and electricity, a fridge that fits, curtains, a geyser that fails in month three. Buyers who arrive with zero cash left have a miserable first year, and it sours something that should feel good.

Put down what you comfortably can, keep a buffer, and be honest with yourself about what the buffer needs to cover.

The costs a deposit does not cover

On an existing property, budget roughly 8 to 10% of the purchase price for transfer and bond costs. That is the conveyancing attorney, the bond registration and transfer duty, and it is separate from any deposit. On a new development this is usually R0, which is a large part of why we point first-time buyers there.

If someone tells you that you definitely need a 10% deposit, they are describing a different market to the one you are buying in. Check your own number before you believe it.

Find out where you stand

The free check tells you what a bank is likely to lend you, with and without a deposit, so you can see the difference in rands rather than in theory. It takes a few minutes, it does not affect your credit score, and it costs nothing. Then you can decide whether to buy now or save for another six months, with real numbers instead of a rule of thumb someone repeated to you.