Information about property finance when buying a property in South Africa

Property finance in South Africa operates in much the same way as in Europe – banks lend people money for the purpose of house purchases. Commonly referred to as ‘mortgages’ in many countries, in South Africa it is referred to as ‘a bond’.

Currently there are no foreign lenders who will secure a bond or mortgage on a South African property. If finance is thus required, it will have to be sourced in South Africa. Outlined below are the main points to be aware of:

  • Exchange Control – The government dictates that a non-resident may only borrow up to 50% of the purchase price. Holders of temporary residence permits (work/business) may borrow up to 75% of the purchase price.
  • Registration – Successful bonds go through a legal registration process that must be carried out by a solicitor. The solicitor in this case may be nominated by you. This is good practice to do. Often he will shadow the work the seller’s solicitor is doing for free if handling the bond registration. For immigrants it is a good idea to register the maximum bond, even if all the funds are not required (see access facility below). This means no further registration fee will be payable in the event you may need to raise a larger bond.
  • Access facility – This is generally the most effective way to structure your bond. It allows you to make overpayments but retain access to the amount equal to the overpayment.
  • Obtaining a bond– this can be achieved in two ways:
    1. Directly from the lending institution i.e. the bank
    2. Via a bond originator

If the loan is obtained directly from the bank, you will be advised on their bond products only. A better deal via another institution may be obtainable. It is therefore prudent to use an independent bond originator who is able to shop around on your behalf to obtain the best terms, conditions and rates.