Buying Guide

We can arrange mortgages for South Africans living in South Africa or overseas, as well as non-South Africans looking to move to SA or simply looking to by an investment or holiday property.

In South Africa the interest rate is not set, but in fact only determined after your application is submitted to the bank and based on a number of factors such as your income, level of expenditure and the postal code and style of the property.

Our SA mortgage system is integrated with all the South African banks, allowing us to simultaneously submit online mortgage applications to all the banks. The bank that is prepared to offer the best deal, 'wins' your business.

What are the steps involved in getting a South African Mortgage?

1. Find out how much you are eligible to borrow by completing our online quotation request form.

2. Instruct Somerset Mortgages to obtain an Agreement in Principle on your behalf.

3. Go to South Africa and find a suitable property.

4. While in South Africa sign a sales agreement and transfer the deposit with Somerset FX to secure the property.

5. Send us a copy of the signed sales agreement, which we will submit to the lender.

6. Lender instructs valuation, if required.

7. Acceptance of life assurance by lender.

8. Lender issues a mortgage offer.

9. Somerset Mortgages will open a South African bank account and arrange buildings insurance.

10. Transfer balance of the deposit to the Lawyers with Somerset FX.

11. Arrange monthly mortgage payments with Somerset FX Regular Payment Plan.

12. Completion.

What type of property can I get a mortgage on?

We can arrange mortgages for individuals or companies to buy main homes; second homes; rental or investment properties; off-plan properties, land and commercial properties. Equity release mortgages are available. Bridging finance is available.

What currency will my mortgage be?

All South African banks will provide mortgages in Rand's. Offshore banks can also arrange offshore mortgages in other currencies such as US Dollars, Pound Sterling, Euros and Swiss Francs.

What is the maximum loan amount (LTV%)?

SA Banks: Please ask, as this is changing continuously.
Offshore: 75% of the property value.

Lending Criteria

Lenders calculate financial commitments (loans and rent) including the requested mortgage, as a percentage of stable pre-tax income. As a general rule the ratio should not exceed one third, but obviously this depends on the figures involved as the higher the income the higher the debt ratio can be. In fact, most lenders try to apply their rules with common sense and look at the actual amount of disposable income, not just the percentage.

What is the minimum loan amount?

The minimum loan amount that Somerset Mortgages will consider is R450,000 for normal onshore mortgages with SA banks. Offshore mortgages have a minimum loan amount of R10million.

How long is the term of the mortgage?

Mortgages must be fully repaid by the age of 80, with a minimum term of 2 years and a maximum term of 30 years.

Do I need life assurance?

No. Life assurance is not mandatory, but is always recommended. Somerset Mortgages can help you arrange life assurance at minimal cost.

Which mortgage types are available?

Both capital repayment and interest only mortgages are available for both purchase and equity release.

How long will it take for my mortgage to be arranged?

With a South African bank we can negotiate an offer within 48 hours. With offshore banks it can take a little longer.

Interest rates

Rand Mortgages
South Africa's Prime Lending Rate is currently 13%. We will negotiate a discount off this rate on your behalf, generally between 1% - 2%. The amount of the discount will depend upon the Loan to Value ratio, the size of the mortgage, the location of the property and your repayment to income ratio.

Offshore Mortgages
We can also arrange mortgages in US$ Dollars, Pounds Sterling, Euros and Swiss Francs. These will offer lower interest rates than a South African Rand mortgage.

Buildings insurance

This must be in place before completion. Somerset Mortgages can provide you with a quote.

What timeframe is involved in securing the mortgage?

An Agreement in Principle can be obtained from a lender once all the requested documentation has been submitted. This takes approximately 24 hours. However, for loan amounts in excess of R10million this may take longer.

A minimum of four weeks should be allowed from application to completion.

Organising payment of your South African mortgage

Please be aware that missing a monthly mortgage payment may have serious consequences and we therefore strongly advise participation in the Somerset FX Regular Payment Plan. This service gives you peace of mind in the knowledge that your South African mortgage repayments will be met automatically each month.

Completion

Mortgage funds will be released by the lender to your Lawyer for completion of the purchase.

Fees and Taxes

• Somerset Mortgages does not charge a fee for arranging mortgages with South African banks.
• For arranging a mortgage with an Offshore Bank, Somerset Mortgages charges a non refundable administration fee of £250 to prepare, package, facilitate and courier your mortgage application.
• Somerset FX does not charge a fee or commission.
• The Bank's Arrangement Fee will generally be 1% for an SA bank and between 0.5% - 2% for an offshore bank. Where possible we will negotiate on your behalf to reduce this.
• The estate agent commission will vary from 4% - 8%.
• Transfer Duty is based on the purchase price and charged at nil below R500,000; 5% between R500,000-R1million and 8% above R1million.
• Legal Fees are approximately 1% - 2%, depending on the value of the property.
• VAT is currently 14%.