South Africa: Mortgages

South African lending criteria

Do I qualify for a South African mortgage?

To qualify for a mortgage in South Africa, a calculation is used to establish whether you can afford to maintain the mortgage repayments. This will automatically happen when you complete the application form, and Conti won’t charge you for this service.

How much can I borrow?

• Calculation based on the valuation or purchase price, whichever is the lower

• Up to 100% of valuation or purchase price for ex-pat South Africans, however if you are a non-South African national the maximum is currently either 50% of valuation for "onshore" loans or possibly 80% for "offshore" loans.

• Based on joint net pay, where joint income is applicable

• Existing liabilities, e.g. mortgage or rental payments, loans, credit card payments and maintenance are taken into account, together with the proposed South African mortgage payments. All this must not exceed 30% of your monthly net income

What evidence of income do I need?

If you are employed:
• Your last three month’s payslips
• Your latest P60 or Employers Reference
• Your last three month’s personal bank statements

If you are self-employed:
• Your latest audited accounts and tax returns
• Your last three month’s business bank statements
• Your last three month’s personal bank statements.

Example mortgage payments

If, for example, your net joint monthly income is £2,500, 30% of this equates to £750. If your only liability is your mortgage payment, of say £300, this would leave a balance of £450 for your South African mortgage repayment

What types of South African mortgages are available?

For our latest rates and to see the different types of South African mortgages on offer, please visit our website or speak to one of our advisers.

• Loans are available up to 100% of valuation or purchase price for South African Nationals, and up to 80% for non South African nationals, in Rands only
• The maximum term of any mortgage is 20 years, this varies on the type of loan
• Repayment mortgages only are available for loans over ten years, but part Repayment and Interest Only loans are available for under ten years
• The minimum loans you can take out are Rand 500,000 "onshore" or Rand 2,000,000 "offshore"

Essential information for buying properties in South Africa

Buying property abroad is not necessarily the same as buying in the UK, there is other essential information you need to be aware of both before and during your property purchase.

• It is of paramount importance to seek independent advice from an overseas solicitor.

• You need to ensure that you will have full title to the property on completion and that you have the appropriate documents available for the lender.

• Before signing the sales contract, the bank will require a copy of this document to be forwarded with the relevant application form. However you are able to sign this contract with the clause “subject to mortgage finance” as the contract, once signed is legally binding.

• You should check with the estate agent and/or your lawyer that you are aware of the costs charged by legal and Government authorities for buying a South African property. The lender will also have their own legal costs for assigning the loan, the cost of which they will normally advise you when they issue the mortgage offer. These associated fees/taxes are typically between 10% - 15% of the properties purchase price.

• Be aware that the solicitor or notary may be incorporating costs for assigning the mortgage within his charges, and you should establish the actual cost before proceeding with a loan application.

• Properties can be purchased individually, in joint names, or partnerships as well as through Limited Companies and Closed Corporations (CC’s). An Offer to Purchase (OTP) on a property needs to be signed in the name of the legal entity the purchaser is buying through, and Limited Companies need to be set up prior to signing the OTP.

© Conti Financial Services Limited 2008

This article is reproduced with the kind permission of Conti Financial Services Limited.

For information and advice on overseas mortgages and residential finance in over 30 countries, contact Conti Financial Services Ltd on www.mortgagesoverseas.com