Home loans for foreigners in South Africa

The South African property market continues to be a prime attraction for foreign investors with the favourable exchange rate and an abundance of luxury houses in scenic locations. Foreign investment is expected to further increase as the economy gradually recover from Covid-19 lockdowns.

Foreigners who are not residents in South Africa, and who are keen to invest in property, can do so individually or jointly, or by acquiring shares in a company that is the registered owner of a property”, says ooba Home Loans mortgage specialist, Yvonne Viljoen.

Yvonne lists her top tips for foreigners not resident in South Africa, who want to invest in property:

  1. If you purchase property through an estate agent, they must be a registered member of the Estate Agency Affairs Board (EAAB) with a valid Fidelity Fund Certificate.
  2. Once you make an offer to purchase (OTP) and it is accepted, an agreement of sale will be drawn up for the buyer, seller, and two witnesses to sign. This contract is legally binding. If either the buyer or the seller cancels the agreement at the 11th hour, they can be sued for expenses incurred, such as wasted legal fees.
  3. Both the OTP and the agreement of sales needs to be fully understood before they are signed and submitted. It is best to seek independent legal advice if anything is unclear.
  4. Property in South Africa is sold ‘voetstoots’ i.e., ‘as is’. However, the buyer must be informed of all patent and latent defects in the property.
  5. Fixtures and fittings are automatically included in the sale of the property. For clarity, these can be listed in the agreement of sale.
  6. Electrical and beetle certificates are required to confirm that the electrical installation is compliant with statutory requirements and that the property is not infested by certain beetles. The latter certificate is usually only compulsory in coastal regions and some regions require plumbing and gas certificates.
  7. All foreigners not resident or domiciled in South Africa must invest one rand in the country for every rand they need to borrow. The amount foreigners or non-residents can borrow is limited to 50% of the purchase price. Approval will be required by the exchange control authorities, which will depend on being able to prove the introduction to South Africa of an amount equivalent to the bond amount borrowed.
  8. Banks will only fund 50% of the purchase value of the property for non-residents so foreign investors will either need to provide a 50% deposit or pay cash and introduce the full amount into South Africa via the Reserve Bank to a designated bank account (which will usually be a trust account of the transferring attorneys) with a registered South African bank.
  9. The record of the deposit of the funds received from a foreign source is referred to as a ‘deal receipt’ and must be retained by the purchaser as it is required for the repatriation of funds when the property is eventually sold.
  10. If it is a joint application, at least one applicant must earn a minimum of R25 000 per month, be eighteen years or older and have a clear credit record.

What documents will I need when applying for a home loan as a foreign investor?

For a full-time employee or someone employed abroad:

  • A client Home Loan Interview Form, signed and dated.
  • A copy of your ID or both sides of an ID Card OR a foreign or South African passport OR a work permit allowing you to work abroad.
  • A Salary Advice OR a payslip for the latest six months (up to submission date).
  • A copy of a full Contract of Employment.
  • If applicable, your latest updated signed Lease Agreements for declared rental income and your completed rental schedule.

For a self-employed individual:

  • A client Home Loan Interview Form, signed and dated.
  • A copy of your passport.
  • Written confirmation of your income (such as a letter from an accountant detailing income, or your latest tax return).
  • A full set of Comparative Annual Financials – signed and dated.
  • Six months latest (up to submission date) Personal Bank Statements.
  • If applicable, your latest updated signed Lease Agreements for declared rental income and your completed rental schedule.

Applying for a home loan through a South African bank

Home loan comparison services, like ooba Home Loans, can assist foreigners buying property in South Africa when they apply for a bond through a South African financial institution.

Potential buyers don’t necessarily have to open a banking account with that commercial bank, because they can transfer funds directly from their overseas account into their home loan account.

Content originally published on ooba Home Loans