Mortgages In South Africa

House prices in South Africa are relatively low compared with those in Western Europe, making it an attractive place to buy a home or investment property. So, if you’re considering buying property in Cape Town as a foreigner, it may be more affordable than you think.

In this article we’ll explain how overseas mortgages in South Africa work, the eligibility criteria and why you should speak to a specialist broker as soon as you decide to buy property there.

Can a UK resident get a mortgage to buy a property in South Africa?

Yes. There are no real restrictions on foreigners buying property in South Africa – although you may struggle if you have a criminal record.

The South African mortgage market is a mature one and you will probably notice several similarities with financial transactions in the UK. But there are some key differences you need to be aware of too.

For example, the terminology differs. In South Africa, mortgages are often referred to as ‘bonds’, a mortgage provider is an ‘originator’ and a leasehold is called a ‘sectional title’.

And it’s worth noting that every mortgage for a non-resident must be approved by the South African Reserve Bank before it can be completed.

Eligibility criteria and deposit requirements

One of the first things you need to do if you intend to buy property in South Africa is to open a bank account in the country. This will be necessary for making your mortgage repayments as well as paying bills and taxes.

And the way in which South African mortgages are assessed differs greatly from what you might be used to in the UK.

Affordability

While affordability is still a vital factor, South African lenders tend to focus on your debt to income (DTI) ratio rather than using income multiples.

Typically, your DTI (including the cost of your mortgage repayments) should be no more than 33% – 35% of your monthly income. Some lenders are more flexible than others on this so, if the numbers are tight, finding the right provider can be the difference between acceptance and rejection.

Try our calculator below to see how this could work out for you:

Credit history

A clean credit history is always more attractive to lenders regardless of location.

All mortgage providers will assess credit history according to their own criteria. Some will accept your UK bank statements or other financial documents as evidence of how you handle your finances. Others will insist on an international credit report.

You can check your credit history for free by heading to our credit reports hub and accessing a free trial on there.

Age

Mortgages in South Africa typically need to be paid off by the age of seventy. The usual term for a mortgage in the country is twenty years, but terms of up to thirty years are possible. Older borrowers may only be able to borrow over a limited term, however.

Deposit

As a non-resident, you will usually need to have a deposit of 50% to secure a mortgage in South Africa. 10% of this will typically be paid up front to secure the property, with the rest payable on completion.

If you have lived in the country for five years or more, or if you have the right to work in South Africa, you will have similar rights to native South Africans when it comes to mortgages. This might enable you to get a mortgage at 75% loan to value (LTV).

How to get a mortgage in South Africa

Working out how much you can borrow is just the first step in getting a mortgage in South Africa.

In order to complete your mortgage, you will need to meet lenders’ eligibility criteria, provide necessary documents and pay a series of fees.

Follow these steps to give yourself the best chance of approval:

How much can you borrow?

As you can see from the information above, your borrowing capacity for a South African mortgage is often limited to 50% of the property value and largely dependent on your income and expenses.

Which lenders offer South African mortgages

To get a mortgage to buy property in South Africa, you must use a registered South African bank.

Some of the major banks include:

Which is best for you?

Deciding which lender and product are right for you requires deep knowledge of the market and the specific terms and conditions associated with each mortgage type.

Unlike in the UK, fixed rates are uncommon in South Africa. This is because banks are wary of volatile interest rates so don’t usually offer competitive rates on fixed term mortgages. Where fixed terms are available, they usually last for five years.

Variable rates are far more common and usually come in at around 10% for locals – sometimes even higher for non-residents. These are still considered affordable and relatively stable for UK borrowers as the pound has traditionally been strong against the rand.

Some lenders offer Prime Minus loans which are similar to discounted variable rate mortgages in the UK.

Get matched with a broker who specialises in South African mortgages

South African properties are sold ‘voetstoots’ (as is), so it’s vital that you make sure everything is checked and double-checked before signing your loan agreement.

There are also local regulations in some areas that must be complied with. For example, some regions require gas and plumbing certificates, while others only insist on electric certificates. In some coastal regions, you must obtain evidence the property is not infested with beetles.

When you add these elements to the standard stresses of taking out a mortgage, it’s easy to see why expert help is necessary for a hassle-free application.

Our broker matching service will assess your situation and pair you up with an expert advisor who has experience of helping people in your situation to secure the best mortgage for property in South Africa.

To get matched with your ideal broker, call today on 0808 189 2301 or enquire online.