Buying your own piece of vacant land
There is something about buying land maybe a few acres of wilderness appeals to your pioneer spirit.
Maybe it's a desire to build a house exactly the way you want, which means starting with an unimproved, vacant land in a new subdivision.
Buying land is different from buying a house, things that never come into discussion in a home purchase -- access, utilities, land-use restrictions -- become extremely important in a land purchase. When you buy an existing house, someone has already gone through the issues of what's allowable on the land.
After taking into consideration these factors, you have identified the property you are interested in and you have signed the offer to purchase then we talk about financing the property.
Are you going to be pay cash or acquiring a bond? If you are paying cash then this will be the end but if you want a home loan it’s just the beginning.
You will need to consider your credit record, affordability and then the LTV (Loan to value) offered by the banks on vacant land.
Looking at the 4 major banks we have here in South Africa, FNB is offering 60%, ABSA is also offering 60%, Standard Bank is offering 75% and Nedbank is not offering bonds on vacant without intentions to build.
Which means for you to apply for loan at Nedbank you must have your entire building documents ready i.e. building contract, schedule of finishes, NHBRC certificate, approved plans etc.
For the other banks you must have at least 40% deposit as well as the bond and transfer costs. I know what you are thinking it’s not fair, why? It’s all about risk; apparently vacant land carries more than any other loan. You will need to show commitment to the bank by putting down deposit.
If by any chance you default, you lose your deposit and property by so doing the risk is shared.
If you are a foreigner or non-SA resident then bringing in your money need not be an expensive option as you can do so free of transfer fees.
With all this in mind don’t forget the other ways of raising the deposit money, there is the pension based loan and the home starter loan. Visit a great mortgage originator.