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When the question comes up, as it will do in most people’s lives, can I afford to buy my own home, the answer will generally be: Yes you can (if you quality for a bond).
A bond, mortgage or home loan as they are known in South Africa is when a bank or other financial body lends a person or persons money against the purchase of a property. Very few people have the financial wherewithal to buy a property without requesting a bond.

Banks like to lend money against properties, and for many years this was the total function of their business. It is only in the last twenty years or so that banks also began to lend money in the form of granting overdrafts, car loans and credit cards.
However lending money against properties, if properly handled, is good business for banks and in normal circumstances they will always be ready to lend money against a property purchase. Of course they do have their lending criteria that they will strictly adhere to. Most people who can meet their criteria will qualify for a bond.

The first and probably the most important criteria to qualify for a bond should be the ability to put down a fairly considerable cash deposit, known in bond terms as equity. From the buyer’s viewpoint as well as the banks, the equity value should be no less than 30% of the value of the property. The more equity the lower the bond required and less the monthly payments.

Bonds are usually repaid over periods of twenty years or more, and the interest on the loan is paid on a decreasing scale. In other words for the first five to ten years of the bond period, the borrower is paying off largely interest and very little of the principal. As the bond reaches its halfway period, then the interest and principal payments begin to reach parity, and towards the end, mostly the principal is being paid off.

Taking out a bond to purchase a property is for the long haul, and has tremendous benefits for a family who succeed in paying off their bond.
For first time buyers, putting down a deposit and meeting the payments can represent a major barrier in achieving their dream of owning a property, and some of them never succeed in hurdling this barrier.

It is not unusual for first time buyers to receive help from family to help them achieve their goal of owning their first property and getting out of the seemingly never ending rental loop. Many young couples starting out have lived a few years in inexpensive rental properties or even with their parents, so that they can save enough money for a deposit on their first home.

Once a family exceed have owned a property for a few years there is a very strong possibility that they will have earned a profit on it, which they can pass on to their next property purchase. It goes without saying that meeting the equity criteria when applying for a bond the second time round and even more so the third time is a lot easier than the first. Qualifying for that first bond is the challenge. If it can be done, then if everything goes to plan, the benefits of home ownership will unfold.