Buying property is one of the biggest financial decisions you'll make. Understanding how much you can afford and what your monthly repayments will be is crucial for making a smart purchase decision.
Understanding Bond Affordability
South African banks typically use a debt-to-income ratio to determine how much they'll lend you. Your monthly bond repayment, along with all other debt obligations, should not exceed 30-35% of your gross monthly income.
Key Affordability Factors:
- Your gross monthly income
- Existing debt obligations (car loans, credit cards, personal loans)
- Credit score and credit history
- Deposit amount (larger deposit = better interest rate)
- Current interest rates
- Employment stability
How Bond Repayments Work
A home loan bond in South Africa is typically structured as follows:
- Loan Term: Usually 20 or 30 years
- Interest Rate: Variable rate linked to the prime lending rate
- Monthly Repayments: Consist of principal and interest
- Early in the loan: Most of your payment goes towards interest
- Later in the loan: More of your payment goes towards the principal
The 30% Rule
Financial advisors recommend that your bond repayment should not exceed 30% of your gross monthly income. This leaves room for other expenses and unexpected costs.
Example Calculation
Monthly Income: R40,000 gross
Maximum Bond Repayment (30%): R12,000 per month
At 11.5% interest over 20 years: Can afford property up to ±R1,200,000
At 11.5% interest over 30 years: Can afford property up to ±R1,500,000
Note: These are approximate values. Actual affordability depends on deposit, credit score, and other debt obligations.
Additional Costs to Consider
When buying property, the bond repayment is just one of many costs:
| Cost Type | Typical Amount | When Paid |
|---|---|---|
| Transfer Duty | 0-13% (sliding scale) | Once-off at transfer |
| Bond Registration | ±R10,000 - R30,000 | Once-off at registration |
| Transfer Attorney Fees | ±R10,000 - R25,000 | Once-off at transfer |
| Bond Initiation Fee | ±R6,000 | Once-off at registration |
| Municipal Rates | R500 - R3,000+/month | Monthly |
| Levies (Sectional Title) | R800 - R3,000+/month | Monthly |
| Home Insurance | R500 - R2,000/month | Monthly |
Interest Rate Impact
Even a small change in interest rate can significantly affect your monthly repayment and total interest paid over the loan term.
Example: R1,500,000 Bond over 20 years
- At 10.5% interest:R14,782/month
- At 11.5% interest:R15,798/month
- At 12.5% interest:R16,847/month
- Difference (10.5% vs 12.5%):R2,065/month = R495,600 over 20 years!
Tips for Getting the Best Bond Rate
- Improve your credit score: Pay bills on time, reduce debt
- Save a larger deposit: 20%+ deposit can get better rates
- Shop around: Compare rates from multiple banks
- Use a bond originator: They can negotiate on your behalf
- Consider a shorter loan term: 20 years vs 30 years = lower interest
- Make extra payments: Reduce principal faster and save on interest
Calculate Your Bond Repayments
Use our free bond calculator to see exactly what your monthly repayments will be and how much property you can afford.
Try Bond Calculator →Frequently Asked Questions
What deposit do I need to buy a house in South Africa?
While it's possible to get 100% bond financing, most banks prefer a deposit of at least 10-20%. A larger deposit improves your chances of approval and can get you a better interest rate.
How long does bond approval take?
Bond approval typically takes 5-10 working days, but can be faster or slower depending on the completeness of your application and the bank's workload.
Can I pay off my bond early?
Yes, you can make extra payments towards your bond principal at any time. This reduces the total interest you'll pay and can shorten your loan term significantly.
What credit score do I need for a home loan?
While there's no fixed minimum, a credit score above 650 is generally considered good. Higher scores (700+) can qualify for better interest rates.