INVESTMENT: Why You Need A Deposit For Your Home Loan (FNB)

Housing in Namibia remains a hot topic because of prices, availability and affordability. FNB Namibia, the forerunner in home loans, remains committed to ensuring that as many Namibians as possible are able to buy or build their own home. “We believe that a property remains one of the best investments a customer can make, not only because of peace of mind that no one can take the roof over your head away from you, but also because of the fact that this investment will always yield a positive growth,” said Thomas Slabbert, Head of Home Loans at FNB Namibia. 

(Photograph: Thomas Slabbert, Head: Home Loans, First National Bank of Namibia)

Not only does FNB Namibia publish an article regularly about the housing index, but would also like to present the public out there with some well researched information to assist customers to make informed decisions. Today’s article concentrates on the deposit and why it is important.

Slabbert: “Putting down a deposit, even a minimal amount, can greatly benefit a home buyer as people who demonstrate the ability to save are typically considered lower risk by the banks.  For many owners your home will be your biggest asset, so the more it can work for you and help you create wealth, the better. This starts as early as when considering buying a property and saving for a deposit.” 

(Photograph: Beachfront home, Swakopmund, courtesy of www.myproperty.com.na )

Around half of all new home loan applicants are for 100% loans, which means that the applicant does not have the intention of putting a deposit down. First-time buyers are least likely to have a deposit available and they are increasing in prominence. According to the FNB 2013 Q2 Estate Agent Survey 22% of new buyers are first-time home buyers. The limited supply of new affordable units is causing the house prices to increase. This makes it even more important for buyers to put down a deposit to enable them to afford the monthly repayment.

There is no right amount for a deposit, banks typically ask for anything from 10% to 20% deposit. However, if customers are unable to afford such a high amount at the time, even 5% is better than no deposit at all. Customers should also take into account that there are many other costs to consider when buying property like transfer duty, registration and initiation fees. 

(Photograph: Executive home, Swakopmund, courtesy of www.myproperty.com.na )

Slabbert: “We find that many customers who have saved additional funds or have a surplus after selling their previous property still apply for a 100% bond with the view to deposit the additional funds after the bond is registered. While depositing funds after registration will bring down the capital and reduce the amount of interest charged to the bond, it is not the most effective way to use your savings; it is far more beneficial to put down a deposit for a bond upfront.”

New homeowners need to realise that owning a home can be expensive in different ways. “Rates, taxes and general maintenance on a larger freestanding house add up quickly and can sometimes end up getting to the point where it is no longer affordable,” cautions Slabbert. 

(Photograph: Family home in Klein Windhoek, courtesy of www.myproperty.com.na )

First-time buyers seem to be much more interested in higher density units where some of the communal costs are shared while a number of existing owners are scaling down to save on the increasing running costs of a property. Many homeowners scale down later on in life to access some of the capital saved in a property. This enables the funds to be reinvested somewhere else for better returns or help to top-up a retirement fund.

“Our 2013 Q2 Estate Agent survey reflects that house prices are currently increasing by 20% per annum and houses take 101 days to sell, it is only natural that the value of these properties would have appreciated during these lengthy selling times”, adds Slabbert.

Tips to Save on your Home Loan

Change the instalment date to the day you receive your salary. As interest on home loans is charged daily, the earlier you reduce your balance, the less interest you end up paying in total. This movement is very small on a monthly basis, but compound interest makes this small change valuable throughout the entire term of the loan and is a great way to save on the total interest paid

Paying as little as a 10% additional payment per month into your bond could save approximately four and a half years of repayments and N$ 368 000 in interest on a N$ 1 million loan over the life of the loan. These calculations have been based on the current level of interest rates. The additional repayment is immediately set off against the capital value of the loan, thereby reducing interest paid and saving you in the long term. 

(Photograph: Family home kitchen in Klein Windhoek, courtesy 

www.myproperty.com.na )

For more information please contact Vicky Muranda, Manager: Corporate Communications at FNB Holdings on telephone: (+264 61) 299 2944.