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How to get a 100% home loan – zero deposit!

With the help of evo, South African homebuyers have a great chance of obtaining a home loan without a deposit. Here’s what you need to know.

Article summary:

  • Home buyers who lack the funds for a deposit have another option available to them: the 100% home loan, in other words, a home loan with no deposit required.
  • Banks in South Africa are currently approving more 100% home loans, in an attempt to boost the property market.
  • Although putting down a deposit has many benefits, the 100% home loan presents first-time home buyers, who may have limited resources, with a viable way into the property market.

While there are many benefits to putting down a deposit on your home, in today’s tough economic climate it may be more realistic to take out a 100% bond, especially if you’re a first-time buyer who does not have easy access to a deposit.

Indeed, if you fall into this category of homebuyer, you’re not alone. According to Mark Coetzee, Head of evo: “More than 60% of all the applications received by evo are from buyers who have no access to a deposit”.

More 100% home loans are being approved

 According to Coetzee, over 80% of these applicants are being approved for finance, and four out of five are successful in their bid to secure a 100% bond. The rest are required to raise a deposit, usually between five and ten percent of the purchase price.

“Contrary to the widely held belief that the chances of getting 100% financing are slim, these stats prove that, when correctly represented, buyers have a very good chance of obtaining a bond without a deposit,” he says.

How a bond originator can help you get a 100% home loan

However, Coetzee emphasises the importance of using a bond originator. “Banks are willing to approve 100% bonds if they can see that you have a clean credit history and can comfortably afford the monthly repayment instalments. An experienced bond originator will ensure you are correctly represented to the financing institutions so that they view your application in a favourable light.”

“It’s essential that these candidates evaluate their financial situation before applying for a bond,” he adds, noting that there are, equally, many advantages to putting down a deposit.

100% home loan versus putting down a deposit

“By providing capital upfront in the home-buying process, you will avoid paying interest on that amount of money for the duration of your loan period, which can amount to a significant saving in the long term,” he explains, adding that “It also stands to reason that the smaller the risk for the bank, the more negotiable it will be on your interest rate”.

Why now is a good time to get a 100% home loan

The banks’ confidence in the South African property market has resulted in a greater willingness to lend, with evo reporting an increase in their home loan approval rate. There has also been an increase in the approval rate of 100% home loans, partially as a result of banks catering to the needs of first-time home buyers, who are less likely to have money for a deposit.

To gauge the affordability of your property price, and the likely chances of obtaining bond approval, it’s advisable to get prequalified with a bond originator such evo,  who provide prequalification as a free service prior to the start of the home-buying process.

“Once you have an indication of the deposit required, you’ll be better positioned to consider the best approach needed to obtain your financing,” Coetzee says.

To make the home-buying process that much easier, evo also offers a range of home loan calculators to help make the home-buying process easier. Get prequalified for a home loan with evo, then, when you’re ready, you can apply for a home loan with evo.