The keys to buying a home in South Africa

Whether you are ready to live on your own, looking for an investment property, or seeking the ideal house to start a family after getting married, both first-time and experienced buyers may find the process of buying a new home challenging. After all, there are several requirements, procedures, and activities, and you may be concerned about making a costly error.

To help you get the most out of your investment, this guide will lead you through what you need to consider before you buy and what to expect during the purchasing process.

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Here’s what this guide covers:

What property buyers should look for when buying their first home
The requirements for buying a house in South Africa
The process of buying a house in South Africa
Home loans for low-income earners in South Africa
Buying a house in South Africa as a foreigner

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What property buyers should look for when buying their first home

Buying your first home requires a big financial investment. It's simple to feel overwhelmed when there are so many properties available and pressure to choose wisely for the future of your family. Additionally, it's a pricey purchase that necessitates a commitment over time, so you'll want to be certain you'll be content. When viewing properties, remember the following essential factors:

Hire a trustworthy property practitioner

The professional must meet a few requirements, such as being qualified and registered with the Property Practitioners Regulatory Authority, before helping you navigate the process of buying your first home. The perfect property practitioner should be knowledgeable about the community you desire to call home. Your property practitioner and you ought to get along well.

Property size

You should have an idea of the size of the house you want before searching listings. This size will be determined by your requirements and preferences. Look at homes with more space if you have a large family or anticipate having one soon. It might make more sense and be more cost-effective to look at smaller residences if you're living alone or with a partner.

Spacious yard

If you have pets or require adequate room for kids to play outside, having a large yard should be a top concern. Keeping up a yard, though, takes constant attention. Look for the landscape that best suits your needs and lifestyle, whatever your taste.

Bedrooms

Depending on how you intend to use them, the house's bedrooms should be enough for your needs. Important things to think about include the size and number of bedrooms, closet space, window views, and general privacy.

Bathrooms

Think about if you want a shower, a bathtub, or both while searching for a home. A thorough inspection of the restroom is also a good idea to make sure everything is in functioning order. Spending your first night fixing a toilet or a faucet is not something you want to do.

Research the area

It's necessary to do your homework on the areas you are interested in as a home buyer. Do you want to relocate to the trendy neighborhood, the suburbs, or a place near the water? It is a wise move to speak with the neighborhood residents about the area, its benefits and drawbacks.

The requirements for buying a house in South Africa

Knowing what you can afford is important when making plans to purchase a new house. The bank will look at your credit score when you apply for a home loan. Your chances of being approved for a loan increase with your credit score. A credit score of 600 or above is regarded as favourable. A score of 670 or higher is regarded as exceptional.

Understanding the pre-qualification procedure is a crucial stage in the process of buying a property since you will also need to be pre-qualified. Once everything is finished, the bank will give you a pre-qualification certificate, which will certify how much money you are eligible for and how much money the bank is prepared to loan you.

Choose a property practitioner with whom you can have a productive working relationship. The procedure will go much more smoothly thanks to their expertise in the real estate market and their capacity to manage paperwork and negotiate on your behalf with sellers.

The house hunt itself is the stage of the home-buying process that consumers often find most enjoyable. Of course, this is also the most challenging step since if you don't find a property that suits your needs, the entire procedure will be for nothing. Decide on the type of neighbourhood, if you want to be close to hospitals and schools, and whether you want to remodel your home.

The process of buying a house in South Africa

Once you've found the ideal house, you may make an offer to purchase. If you are in a remarkable financial position, you may be able to buy property in cash in South Africa. If you are applying for a home loan, you may be required to pay a deposit, which is normally between 10% and 20% of the total cost of the house. Many banks do provide 100% home loans to customers with a good credit rating.

These are the basic important documents you would need for an application for a home loan:

Last three months' salary slips. If you are married in a community of property then your spouse's salary slips are also required.
Last three months' bank statements for your account (and your partner's if applicable).
Copy of your South African ID document (and your partner's if applicable).
Statement of your monthly income and expenses.
Personal assets and liabilities statement.
Copy of the purchase agreement.

Happy financial advisor having consultations with young couple at their home

You will receive a bond estimate from each loan institution to which you submit an application. The relevant bank will give the bond attorney the go-ahead to start registering the bond after you select your desired quotation.

The seller recommends that the property be transferred into your name to the conveyancing attorney. The bank where the seller's current bond is stored will be asked by the attorney for the title deed and cancellation numbers. The local authority or municipality is next asked for a statement of rates and taxes.

The bond attorney communicates the amount available for guarantees and requests the draft deed of transfer as well as the guarantee requirements from the transferring attorney.

On receipt of a guarantee for the amount owed, the cancellation attorney is asked to cancel the seller's present bond. The transferring attorney gets them before providing a copy of the title deed and cancellation figures to the bond attorney. The transfer documentation must then be signed by both you and the seller. The transferring attorney can then pay the rates, taxes, and transfer duties after you pay the transfer charges.

The proper bond paperwork will then be prepared by the bond attorney before you sign it and pay the associated expenses or fees. The bond attorney drafts and issues the guarantees before sending them to the transferring attorney. Additionally, the bond lawyer will complete the bond paperwork for Deeds Office registration.

The transferring attorney receives the assurances and forwards them to the cancelling attorney. The bond attorney receives cancellation approval from the bank that holds the seller's current bond. The respective attorneys create the new bond and cancel the bond for lodging at the Deeds Office. This can happen only once all the essential and appropriate paperwork has been signed and all charges have been paid.

The Deeds Office will next analyse the supplied paperwork for 8 to 10 working days before registering the transaction if no revisions are required. The bank then pays out the loan based on the assurances provided. This is accomplished on the day of registration. A minimum three-month waiting time is necessary for the bond's registration and transfer.

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Home loans for low-income earners in South Africa

If you do not have access to cash, you can qualify for a home loan even if you have a lower to middle range income. Although tougher, it is not impossible. Each lender has its own set of requirements for loans. Your chances of being accepted will also depend on the sort of loan you're applying for and the amount you want to borrow.

If you are a South African citizen or permanent resident, you could be eligible for a government housing subsidy for first-time buyers. The Finance Linked Individual Subsidy Program (FLISP) is a government subsidy for first-time home purchasers with low income that serves the affordable housing market. To be eligible for FLISP, your income must be between R3501 and R22 000. FLISP aims to make house ownership in South Africa more accessible for first-time homeowners from lower to middle-income families.

In simple terms, the government gives you money to assist in the purchase of a property provided you satisfy the requirements. There is no catch and no need to repay this subsidy. However, you must fulfill the following requirements:

a monthly household income of between R3,501 and R22 000.
Must be a citizen of South Africa and be at least 18 years old.
You must have a dependant or be either married, living with someone else, or cohabiting.
You must not have owned a fixed residential property before.

Prior to April 2022, you had to apply for a house loan and have your application accepted before you could submit a FLISP application. Now, you may apply using other financial resources, such as:

The beneficiary’s pension/provident fund loan.
A co-operative or community-based savings scheme, i.e. stokvel.
The Government Employees Housing Scheme.
Any other Employer-Assisted Housing Scheme.
Certified copy of the deed of sale.
An unsecured loan.
An Instalment Sale Agreement or Rent-to-own Agreement.

buildings on a hill at turquoise beach in cape town, south africa

Buying a house in South Africa as a foreigner

With the ability for foreigners to purchase and own property, South Africa has one of the most open real estate markets in the world. Out of the 54 countries in Africa, it is one of just five that are on the radar of international buyers. Egypt, Morocco, Namibia, and Botswana round out the list of nations.

Purchasing property in South Africa is a tempting idea. The homes and apartments for sale in South Africa typically provide outstanding value for the money, in addition to being in beautiful places for living or setting up a vacation home. Foreigners find purchasing real estate in South Africa particularly tempting due to favourable exchange rates.

Foreigners are typically subject to the same rules as South African citizens, so there are no limits on their ability to buy and own real estate in South Africa. Only foreigners who are present unlawfully are prohibited from acquiring property in South Africa.

As a result, a foreign person may hold property singly, jointly, or in undivided portions. As long as they are registered in South Africa as an outside business, foreign corporations and trusts are also allowed to acquire property there.

The Reserve Bank must approve any loans to non-residents on foreign exchange before they may be made. Mortgage bonds registered in the name of the bank making the loan serve as security for all loans. Under certain circumstances, major banks will provide loans to overseas purchasers. Non-residents are permitted to borrow up to 100% of the money they bring into South Africa to pay for a property. Banks will, however, only finance non-residents up to 50% of a property's purchase price, subject to their customary terms and conditions. In other words, non-residents who bring R500 000 into South Africa to purchase a R1 million property would be entitled to apply to the Reserve Bank for approval to apply for a bond for the remaining R500 000.

Non-residents who have invested money in South Africa over a period of years are eligible to borrow up to 100% of their total investment. This may equal more than half of the cost of buying the home.

Consult with professionals before acquiring your dream home

When purchasing real estate, it is critical to work with a team of specialists you can rely on. Seeff's specialists have extensive expertise in aiding both locals and foreigners in purchasing property in South Africa. Contact our qualified professionals for more information.