How do you get a mortgage for your first home?

A South African mortgage, usually called a home loan or bond, is long-term finance secured against the property being purchased. The property provides security for the lender, but approval is still based heavily on the applicant's ability to repay.

Under the National Credit Act 34 of 2005, credit providers are required to conduct an affordability assessment before granting credit. For a home loan, the bank will typically look at income, monthly living costs, existing credit commitments, repayment history and the applicant's overall financial position.

The bank also considers the property itself. A strong income does not automatically guarantee a mortgage if the valuation does not support the purchase price or the property creates unacceptable security risk for the lender.

What documents are normally needed?

Requirements differ between banks and applicant types, but a salaried first-time buyer will commonly need:

• a valid South African ID or acceptable identification;
• proof of current residential address;
• recent payslips or another acceptable form of income verification;
• recent bank statements;
• a breakdown of regular monthly expenses and existing debts;
• the signed Offer to Purchase once a property has been selected;
• additional documents for a joint application where applicable.

Self-employed applicants may need considerably more financial information, including business bank statements, tax documents and financial statements. Banks can also request additional evidence where income is irregular or comes from several sources.

Government support for first-time home buyers

Government support is especially important for the South African “gap market”: households whose income may be too high for a fully subsidised government home but who can still find conventional housing finance difficult to access.

What can First Home Finance be used for?

• buying an existing residential property;
• buying a new residential property;
• reducing the mortgage amount for an eligible purchase;
• buying a qualifying serviced residential stand;
• building on an eligible serviced stand through the required building route;
• certain alternative financing structures recognised by the programme.

Government Employees Housing Scheme

Public servants employed by national and provincial government departments may also have access to the Government Employees Housing Scheme (GEHS). GEHS is an employee housing-support scheme rather than a universal public mortgage programme.

Its services include housing allowances, housing education, assistance with access to affordable housing, mortgage-based finance, some non-mortgage housing-finance solutions and support in accessing qualifying government subsidies.

GEHS states that employees must first enrol with the scheme to access its services. Mortgage finance is still provided through participating registered financial institutions and remains subject to lender affordability rules, the property value and the lender's credit conditions.

What does buying a first home really cost?

The monthly mortgage instalment is only one part of the budget. First-time buyers should calculate both once-off acquisition costs and ongoing ownership costs before deciding on a property price.

The current South African Revenue Service transfer-duty table provides a 0% rate up to R1,210,000, with progressive rates above that threshold. This does not mean that purchasing a property below that value is completely free of legal or registration costs.

Check current SARS transfer duty rates

Advantages of buying your first home with a mortgage

• A mortgage makes it possible to purchase a property without saving the full purchase price in cash.
• Regular repayments gradually increase the owner's equity in the property.
• First-time buyers may qualify for government assistance or special lender products.
• A suitable deposit can reduce borrowing costs and monthly repayments.
• A fixed home gives greater control over long-term housing arrangements than repeatedly moving between rental properties.

Disadvantages and risks to consider

• A home loan is normally a long-term financial commitment lasting many years.
• Interest can significantly increase the total amount repaid over the life of the bond.
• Variable interest rates can cause the monthly instalment to rise.
• Property owners must carry maintenance, rates, insurance and other ownership expenses themselves.
• Selling shortly after buying can be expensive because purchasing and selling both involve transaction costs.
• Serious payment default can ultimately place the property at risk through lawful enforcement procedures.

How to improve your chances of mortgage approval

There is no single trick that guarantees approval. A strong application normally comes from improving the underlying affordability rather than submitting several applications at random.

• reduce expensive unsecured debt before applying;
• avoid new unnecessary credit shortly before the mortgage application;
• pay existing accounts on time;
• keep bank statements stable and explain unusual transactions where necessary;
• save a deposit and a separate emergency fund where possible;
• do not choose a property at the absolute edge of your monthly budget;
• prepare all income documents before submitting the application;
• check whether First Home Finance or GEHS applies to your situation.

Frequently asked questions