The first thing we need to understand is that the banks are all regulated by various bodies like the National Credit Act, BASIL, etc and as such they might seem extremely conservative at times, especially for the above group of home loan applicants, but it is not always their choice.
A Financial Institution is a business like any other, with shareholders and investors that want to see a financial return. As such, the business decisions a bank sometimes makes and the criteria they apply might not seem logical to the man on the street applying for finance or credit, but there is a larger plan at work and often one that will ensure that the bank is still around and able to provide credit to us, should the economy turn.
So, you are a South African citizen working abroad and earning a good income – what challenges will you face when you want to invest in property in South Africa? Well, firstly there will be a restriction on the percentage loan you can apply for to buy a house. This varies from bank to bank, with some only offering 50% home loans, others 70% and some slightly more with the maximum home loan you would be able to get from one or two institutions out there only, most probably being around 85% of the purchase price of the property, regardless of the Rand value. A substantial deposit is crucial if you fall in this category.
If you are not a SA Citizen but have a valid Work or Residence permit you will in all likelihood only qualify for a 50% home loan. There might be exceptions for prime candidates, but generally banks take quite a conservative view on these applications. It is also important to note the validity of the Permit, as some banks go as far as saying there must be a minimum time left before it expires, for them to consider home finance. An option for someone that falls in this segment would be to purchase a property together with a SA Citizen, as the banks are then likely to look more favourably at the application. In my experience, having applied for a Permit or renewal thereof is not always good enough for the banks, especially as we all know how slow the SA Department of Home Affairs can be and there is no guarantee of when the Permit will actually be issued.
For foreign nationals (non-citizens not working or residing in SA) the absolute maximum home loan is 50% of the purchase price, and only with some banks.
I feel it is important to clarify what ‘working abroad’ means in the banks’ opinion. If you earn income from outside SA borders, work at sea and/or earn foreign currency, you are seen as working abroad or a foreign income earner. In some cases, if the International company that employs you have an established office in SA and you are based here, even though you work abroad for certain periods of the year, your bond application might be viewed differently, but it will have to be motivated and explained to the banks comprehensively. These types of applications are rarely similar, and as such each one is considered on it’s own merits, but some of the standard criteria will still apply.
This is where an experienced Bond Originator that has dealt with applications like this will add a lot of value. The types of clients we have assisted in obtaining home finance include Oil Rig workers, Pilots, Cruise Liner employees, Captains & employees of luxury Yachts, Teachers that work abroad, South Africans living and working here but are paid in foreign currency, etc.
It will always be advisable to start doing your homework long in advance of the potential home purchase, to ensure you receive advice applicable to your individual situation and can start preparing the correct documentation.
Yours in Home Loans…