Which bank will give you the best loan-to-value deal?
One of the most stressful parts about buying or building a new home is the waiting period between submitting your documents and essentially receiving a yay or nay from the four major commercial banks.
Understanding each bank’s criteria for lending and how much risk appetite they have for employed versus self-employed, as well as the various home loan values, will go a long way in helping you target the bank you believe will, firstly, grant you a loan, and, secondly, at the best loan-to-value (LTV) ratio.
While you may want to build your own home, requesting finance for the vacant plot from Nedbank (even if this is your primary bank) will see you fall short on approval as Nedbank does not loan against vacant stands. For this, Standard Bank may be your best bet as it is the only commercial bank that grants up to 80% LTV whether you are a Standard Bank account holder or not.
For completed homes, self-employed applicants may find more joy applying at Absa, which offers a maximum of 90% LTV on purchases up to R2m – whether they are Absa clients or not. FNB does offer up to 90% LTV up to R3m, but only to FNB customers.
FNB comes out on top for building loans – for both FNB account holders and non-customers – providing 90% LTV up to R3m; Absa will give you a maximum of 75% LTV between R2m and R3m.
Tania Jonker Jones, property finance consultant at Homeloan Junction, tells HomeTimes the banks’ LTV criteria has not changed much in the past year, but expects the recent credit downgrade to have an effect.
“We will definitely have an interest rate increase this year; we just don’t know when,” she says. “Vacant land will, however, remain at 60% LTV and should not be affected by the credit downgrade.”