Getting a mortgage in South Africa

Getting a mortgage in South Africa

Home Housing Buying Getting a mortgage in South Africa
Last update on December 27, 2018

Rules for home loans in South Africa may differ to those of your home country. Get to know the mortgage rates and other details associated with taking a mortgage in South Africa with this guide.

There are no legal restrictions on foreigners buying property in South Africa, although non-residents looking to invest may have to pay as much as 50 percent of the purchase price upfront as a deposit. The relatively low cost of South African property compared to many western European countries has made purchasing property in South Africa an appealing option. 

Whether you are an expat resident looking to buy or a non-resident looking to invest or purchase a holiday home, it is likely that you will have to take out a South African mortgage. All loans to foreign nationals by South African banks are subject to approval by the South African Reserve bank.

This guide to South African mortgages (often called ‘bonds’ in South Africa) will explain:


Should you rent or buy property in South Africa?

Home ownership is common in South Africa. According to the 2015 South African General Household Survey, 53.8% of households are homeowners with a further 9.7% partially owned. The relatively affordable South African housing market together with the fall in the value of the South African rand in recent years has made buying a home in South Africa an attractive option for foreign residents.

The average house price in South Africa is currently just over ZAR 500,000 (approx. EUR 31,400) in low-income areas, just over ZAR 1.5 million (approx. EUR 94,000) in middle-income areas and around ZAR 2.9 million (approx. EUR 182,000) in upper-income areas. This is more affordable than in many western European countries. As rent can often be expensive in South Africa, especially in the bigger cities such as Johannesburg and Cape Town, many expats opt to buy if they can.

Home loans South Africa

However, the high-interest rates and additional costs of buying a property in South Africa – plus high capital gains tax on profits when selling – make it less appealing for those not planning to stay in the country long term. Foreign residents are generally offered less favourable conditions on mortgages in South Africa than locals, including higher interest rates, so you may want to rent if you think you will only stay a few years.

See our guides to buying a property and renting a property in South Africa for further information.

Who can get a mortgage in South Africa?

There are no legal restrictions on anyone, including non-residents, buying property in South Africa. However, conditions on mortgages in South Africa for foreigners are stricter than for home residents. For example, all loans to foreign residents and non-residents need to be approved by the South African Reserve Bank. Foreigners will also usually only be permitted to borrow up to 50 percent of the value of the property, with the other 50 percent being paid as a deposit. Terms tend to relax slightly if you can prove you have a South African residence or a work permit, but this varies from bank to bank. Some banks may require you to set up a South African bank account if you don’t already have one so that your South African mortgage payments can be debited.

If you are given permission for a loan by the South African Reserve Bank and pass the necessary financial checks, you will be able to take out a South African mortgage. In order to apply for a mortgage in South Africa, you will need to produce the following:

  • valid ID (e.g. passport)
  • proof of South African residence (unless purchasing as a non-resident)
  • Certificate from the South African Reserve Bank proving permission to take out the loan
  • proof that you’ve passed the credit check (e.g. bank statements or international credit check)
  • proof that you can afford the mortgage. The standard debt-to-income ratio in South Africa is 30-33%, meaning that your South African mortgage repayments plus existing debts cannot be higher than 33% of your gross income.


Rates for mortgages in South Africa

South African mortgage rates are quite high, with standard interest rates at around 10 percent. Interest rates on South African mortgages tend to be set slightly higher for foreign residents. Variable rate mortgages in South Africa are more popular than fixed rate ones, mainly due to the unfavourable fixed interest rates.

Mortgages in South Africa can be taken out over a period of 30 years, although it is more common for people to take out 20-year mortgages. You will normally need to have paid off your South African mortgage in full by the time you reach 70.

If you default on your South Africa mortgage payments, you risk losing your home. If you experience any difficulty in meeting payments, you should contact your bank immediately.

Mortgage calculators for South Africa

Mortgage calculator South Africa

You can check monthly repayments and maximum loan availability on this South African mortgage calculator. You can check likely administration costs on the mortgage here.

Costs of securing a South African mortgage

There are a few add-on costs that you’ll need to budget for when buying a South African property and taking out a South African mortgage. It is advisable to plan for an additional 4-5 percent on top of property costs.

South African mortgage costs include:

  • Bank fees, which include valuation fee (property assessment fees are usually between ZAR 1,000 – 3,000), registration fee (between ZAR 70 – 1,250), mortgage initiation fee (between ZAR 200 – 5,000), interim interest (from registration to first instalment) and administration fee (monthly handling fee is usually between ZAR 5 – 25)
  • Transfer duty, which ranges from 0 percent (on properties up to ZAR 750,000) to 11 percent (on properties over ZAR 2.25 million)
  • Conveyancing fee (between ZAR 1,250 – 36,000 plus VAT)
  • Building insurance, which is usually required by South African mortgage lenders. See more information in our guide to insurance in South Africa.


You can check administration costs with this South African mortgage calculator.

Tax refunds on your South African mortgage

There are no tax benefits if you own and live in a South African home. Tax deductions on homeownership expenses apply only to second homes and those bought for buy-to-let investment. Any rental income derived from the property needs to be added to other taxable income but the following expenses are tax deductible:

  • rates and taxes
  • bond interest
  • advertisements
  • fees for letting agents managing the property
  • homeowners insurance
  • garden services
  • repairs and maintenance (but not improvement costs)
  • security and property levies


See our guide to taxation in South Africa for more information.

How to apply for a mortgage in South Africa

You will need to follow these steps to apply for a mortgage in South Africa:

  • Decide if you want to apply directly through a bank or use a mortgage broker. More information below.
  • Choose an appropriate mortgage and find a qualified solicitor to act on your behalf. Details on types of South African mortgages are below.
  • Hand over the requested paperwork to the bank or broker.
  • Work out what will be the maximum amount you can borrow, how much monthly payments will be and what the additional fees will be using the South African mortgage calculators.
  • Find a suitable property within your budget and make a formal offer.
  • Once the price has been agreed, you will have to pay the South African mortgage deposit to secure the sale and agree on a completion date.


Banks in South Africa offering mortgages to foreigners

All major banks in South Africa offer mortgages to expats, including:

Mortgage rates South Africa

Mortgage brokers in South Africa

What types of South African mortgage are available?

There are three main types of South African mortgage (or ‘bond’) available. You will be able to discuss with your bank or broker which is the most suitable.

Fixed-rate mortgage

This is a type of mortgage where the interest rate is set at a fixed amount throughout the repayment period and is not affected by fluctuations in the interest rate. Fixed-rate mortgages in South Africa are generally less popular due to uncompetitive interest rates offered by South African banks.

Variable-rate mortgage

If you have a variable-rate mortgage, your monthly repayments will vary according to the current interest rate in South Africa. Although there is less certainty regarding repayment amounts with this type of South African mortgage, it is more commonly taken out than a fixed-rate mortgage.

Interest-only mortgage

As opposed to the fixed and variable-rate mortgages, which are both repayment mortgages, the interest-only mortgage is one where you only pay off the interest for a set period (usually 20 years) and then pay off the balance owed on the mortgage in one lump sum at the end of the term. This is a newer type of mortgage in South Africa but has been used in several other countries for quite a while, However, since the 2008 financial crash, it has become more difficult to take out an interest-only mortgage.

Not all South African banks will offer an interest-only mortgage and it’s the most difficult one to apply for. It’s generally used for buy-to-let purchasers and in cases where the buyers can demonstrate they will have the capability to pay off the lump sum at the end of the term.

Further information


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