It usually requires a long-term financial commitment in the form of a bond to cover the cost of the home. While most buyers have an idea of how much they can afford to pay each month towards their bond, few realise the importance of putting down a deposit when applying for finance.

According to Carl Coetzee, CEO of BetterBond, a deposit will make a significant difference when it comes to banks deciding whether to approve or decline a bond application. “BetterBond applies to multiple banks on the buyer’s behalf, to secure the most competitive lending rate. A deposit - even if just 10% - will go a long way to securing a better interest rate. Banks certainly look more favourably at an applicant who appears to be a lower lending risk, and paying a deposit suggests that the applicant is able to manage their money.” It also counts in a buyer’s favour when negotiating with a seller, says Coetzee. “Being able to put down a deposit signals intent. Sellers are more likely to consider an offer if they are dealing with a serious buyer.”

Being able to offer some form of deposit will  also have an impact on the gross household income required to qualify for a bond. For a R2 million property, the gross monthly income required for a bond at the current prime lending rate of 7% is almost R52 000. By putting down a 10% deposit, the monthly gross income required for a bond on this property drops to around R47 000, and reduces the monthly bond repayments by just over R1 500. 

The following table shows the potential savings when paying a 10% deposit on a R1 million home, with a prime lending rate of 7%,  8% and 9%.