Buying a house isn’t just about paying a lump sum and being done with it. In fact, it’s more true to say that buying a home comes down to paying various fees of varying sizes, such as the bond initiation fee (currently set at R6 000) and the enormously expensive transfer duties.

Among these costs is the deposit – a percentage of the purchase price and is typically paid upfront. While this isn’t a legal obligation, in South Africa it’s becoming accepted that most banks will require a deposit. The question is, how much do you need to put down? And how do you make sure that you have this cash on hand?

Here’s a review of how big a deposit you need to put down and how to get the cash together to pay for it.

Do You Need A Deposit?

You don’t always need to have a deposit when buying a home. For instance, the banks are becoming more willing to grant a 100% home loan in an effort to help first-time buyers enter the property market. So, a deposit might not be required at all in order to qualify for a home loan.

This may not be the case for other buyers, though. And it’s worth pointing out that even if the banks don’t require a deposit, some sellers may stipulate it as part of the offer to purchase (OTP) to give themselves more security that the buyer is serious and can afford to go through with the purchase.

The Size Of Your Deposit

The size of a deposit isn’t bog standard in the property market. The amount you need to save for a down payment can vary depending on the price of the home, your credit rating, and the bank’s own requirements. The bank may also assess your financial risk profile and factor this into their decision.

It used to be that a down payment came to around 20%, but it’s become much more common to put down less. Generally speaking, though, the size of the deposit ranges from a possible 10% all the way to 30%.

What If The Bank Doesn’t Require A Deposit?

If there’s no requirement and you’re deciding what kind of deposit to put down, then the general rule is to choose an amount that is affordable for you to save for on a monthly basis. It may be tempting to select an amount that will bring your monthly bond repayments right down, but if this puts too much pressure on you and causes you to become unable to honour your other commitments and risk your credit rating, then it’s not worth it.

The key is to weigh your affordability up against a deposit amount that will show that you are serious about buying the property and can afford the purchase. Not only will this improve your chances of having your home loan application approved, but it can also lead to a possible lower interest rate on your home loan.

Remember, the higher your deposit, the lower the amount you will need to borrow from the bank and the lower your monthly instalments will be. Balanced against how much you can realistically afford to save, you’ll be able to choose an amount.

Tips On How To Save For Your Deposit

Once you’ve set a realistic goal, whether it’s 5%, 12%, or as high as 30%, it then becomes about saving enough within a set timeframe in order to buy your home. Stashing away enough money becomes that much more achievable if you break it up into manageable steps.

Here are a few tips to make saving a more manageable process:

1. Make saving for a house your number one priority to make it easier to cut down on things like eating out and splurging on treats.
2. Prepare a new budget that accommodates your savings.
3. Choose what to cut back on and even consider switching to cheaper service providers.
4. Track your spending to avoid overspending and maintain full control over your finances, budget, and spending habits.
5. Put off major expenses for a little while, such as a December holiday away from home.
6. Become a bargain hunter so that you can buy what you need at better prices.
7. Put your savings into a separate account so that this money is strictly off limits.
8. Consider a side hustle to earn extra money, like freelancing or selling items online.
9. Keep your eye on the goal, because saving for a deposit isn’t easy.

Feeling informed?

Saving for a deposit on a home loan can be a daunting experience, but it doesn’t have to be. It requires careful planning and budgeting. A key part of this is finding out how much you can afford, which we can help you with! Try out our Home Affordability Calculator to see for yourself. You can also get a free property valuation report to make sure you are paying market value.

We trust that this advice is helpful, and don’t forget that AA Inform is home to a range of useful tools and resources – including a personal loan calculator, access to multiple car and home insurance quotes from the AA Insurance Supermarket, and much more.