How to buy property without a home loan

Although mortgages are a common way to purchase a home, you can only get one if you qualify. The qualifications include an acceptable credit score, a sufficient down payment, and meeting a bank’s income and employment requirements.

Given the fact that few people have the resources to buy a property for cash, and almost half of bond applications are declined by banks, many South Africans have likely wondered if there is another way of buying property.

If you think outside the box, you can possibly pull off a home purchase without a costly loan.

Save by only using one income

Some people like the idea of paying cash for a house, but don’t think it’s a reality. If you’re a two-income household, one method for getting a home without a mortgage involves living off a single income for a few years.

If you and your partner work and earn a decent salary — and live in an affordable area — you might be able to save enough for a cash purchase by keeping your life as simple as possible and subsisting off one income.

Of course, living simpler is much easier said than done. To make it work, consider renting out a room in your house or apartment to help cover expenses, or you can rent a room from family or friends. Other options include skipping vacations, spending less on entertainment, and sharing a car. These are sacrifices that pay off in due time.

Sell your current home and buy a new one

If you’re currently living in a home that you don’t want, then it would be wise to sell it and purchase a new one. Also, if you’re thinking about downsizing and you have plenty of equity in your current home, another option is selling your home, taking the profit, and moving to a location with a lower cost of living.

This works if you’re currently living in an expensive area but thinking of moving to a location where you can get more house for your money. This could be exactly what you need to pay cash for a new property in a different part of the country.

Or get an investor

You might not be looking for property to use as a primary residence, but rather an investment property. In this case, consider finding an investor. Getting a mortgage for an investment property is tricky. Many lenders require a higher credit score for investment properties, plus you’ll need a higher down payment and cash to fix up the property.

What you can do, however, is seek out an investor to cover the expense of buying and improving the home. Some investors will pay cash for properties and provide funds to rehab the property. Once you fix up and flip the home for a profit, you could split the proceeds with your investor.

The Big Deposit

If you do decide to go with getting a home loan, you need to consider the deposit. Some buyers also struggle with getting a deposit together to purchase a new home. You can still buy property without raising a big deposit in South Africa. Here are two ways to get on the property ladder without putting a lot of money down.

Partner up

When partners buy together, each party would generally be expected to contribute a share of the deposit and the bond repayments. When assessing affordability, the bank will take both partners’ incomes into account, and this will increase the chances of being granted a bond.

Buy a bargain

This is one option that could help you avoid raising a deposit. In practice, if you buy a property that’s priced way below its market value, the bank is more likely to grant a 100% bond because it knows that it will get its money back if it’s ever forced to sell it.
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It is important that there is more than one way to go about purchasing a property in South Africa, you even have options when it comes to the deposit.