This guide looks at the home loan requirements for South Africans living and working overseas, but are looking to purchase property in South Africa.
Related Topic: Home Loans For Foreigners Buying In South Africa
The majority of our banks such as Absa, Standard Bank, FNB, Nedbank, SA Home Loans, and Investec approve home loans for South Africans Living and Working Abroad. The key question is just how much are they willing to finance? The Loan-to-Value percentages vary between 50% and 90% depending on the merit of each individual application and its unique set of circumstances.
The Major Factors That Positively Influence Your Application
Based on over 13 years of experience, some of the major factors that positively influence their decisions are:
- qualified professionals
- permanent employment
- previous buying record
- existing and good standing credit profiles
- active local bank accounts
- an excess of 20% cash deposit
- positive asset portfolio ie savings, investments, etc
Note: Another important factor to note is that an application to permanently emigrate must not have been made, nor a surrender of permanent residency status in SA.
Keep At Least One Credit Account Active In SA
Preparation is always half the job done, in saying so it is best to set up a local bank account with at least two of the major financial institutions in SA and transfer funds each month to maintain and build a relationship whilst saving up the capital deposit required to purchase a property locally. Many SA citizens make the common mistake of closing every account in SA when moving abroad.
However, it is important to keep at least one or two credit accounts active even if it means only paying the monthly account fees to do so. This will save a lot of hassle in securing a good loan amount as well as an attractive interest for that future property purchase.
The Documents Required
There are a set of standard documents that would always apply when approaching the bank for property finance, these are grouped under the affordability assessment documentation which pertains to verification of income and employment.
Then there is the wider scope of documents pertaining to the specific type of property purchase involved. For example, when purchasing a vacant plot and building, you will require approved architectural building plans from the local municipality, a builder’s contract confirming the start and end date of the project, costing and finish schedules, as well as terms of progress payments. For these specific loans, the banks would only finance up to 80% maximum of the projected cost, and it’s always advisable to have a little extra cash flow to support any unplanned for building expenses.
When securing home loans for South Africans living abroad, there are two main categories that we can divide this specific type of applicant into:
- The first are those South Africans who have taken up employment outside SA borders, and have set up full international banking accounts to where their monthly salary deposits are made.
- Then there are those applicants who work for an international company, but who are still able to deposit their monthly salaries directly into a local South African banking account.
In both these circumstances, it is important to note that the salaries are derived from an international employer, and are paid in foreign currency.
Because the salary income is generated from a foreign source, the bank will score your application for a lower loan percentage. This is due to the higher risk attached to these types of home loan applications.
While we could argue most SA citizens living abroad are actually earning higher salary brackets and therefore are likely to have more disposable income to service their monthly bond repayments, the banks are having to consider the historical data that points to the fact that:
- the majority of SA citizens working abroad will return locally to take up permanent employment in SA usually within an average of 5 years
- since the home loan repayment term is set over a 20 year period, the bank will need to account for when the salary will be localised and reduced to ZAR currency in the future years to come, which largely amounts to the reason of a lower percentage loan offer
Home Loans for South Africans living and working abroad presently start from as low as 50%, and go up to a maximum of 90% of the property purchase price.
How To Secure A Bigger Bond And Improve Your Chances Of Approval?
To ensure that this specific type of application is processed favourably, it’s best for temporary expatriates to still continue managing at least one local bank account and a few credit accounts in SA whilst living and working abroad. This will help to keep an active payment profile and improve the overall scoring of the bond application.
An active track record of credit account repayments and bank transactions in SA assures the bank of payment commitments even whilst applicants are managing bulk of their banking transactions abroad.
I personally would suggest keeping an active account running with ABSA, as we have secured up to 90% of property prices through ABSA Home Loans for expatriates, as opposed to lower loan ratio percentages from the remaining major banks.
Should you need further information, please contact us.