Installment Sales – Buy Your House Without the Bank

Securing a home loan to finance the purchase of a new property has become considerably more difficult in recent times.

Although interest rates are at record low levels, most buyers are still struggling to meet the strict requirements of get a bond.

But, as the problem continues to grow a number of alternative solutions are becoming very popular.

Installment Sales is one alternative that many buyers are using these days to buy houses without involving a bank at all.

What are Installment Sales?
Basically an installment sale is an agreement between the buyer and seller where the buyer agrees to acquire the property in installments over a period of more than a year and less than five years.

The real benefit of an installment sale is that if the buyer does not need to apply for a home loan. Only at the end of the installment period will the buyer need to close the transaction via a home loan or cash.

The biggest problem with these types of agreements is – of cause – what happens if the buyer defaults on his monthly payments?

To protect the seller in the case when the new buyer defaults, the contract states that the all previous payments made by the buyer will be lost and the property will revert to the seller again.

How To Buy A House Without The Bank

How To Buy A House Without The Bank – Seller Financed Deals

Buy A House Without Using The Bank To Apply For A Home Loan

Recent figures show that only about 50% of credit active South Africans are in a good standing with their credit profiles. This means that homeownership is out of reach for millions of South Africans, because these clients are not able to secure a home loan to buy a property.

How To Buy A House Without The Bank

Just like rent to buy properties, seller financed property sales could be a solution for you.

Although the banks have been developing solutions to assist lower income earners, the number of solutions available to blacklisted clients remains very limited.

As a result, Rent-To-Buy Property agreements are becoming increasingly popular.
Read More About: Rent-To-Buy Properties For Blacklisted People

If you are blacklisted or unable to secure a home loan due to poor credit, seller financed property sales might be the solution to your problem.

In seller financed property sales, the banks are cut out of the deal. The seller and the buyer agree on a payment schedule that would allow the buyer to pay for the house in monthly installments over a number of years.

These deals are very similar to a home loan, except the buyer pays the monthly installments directly to the seller every month and both parties keep a record of the payments made.

The problem is trying to find a seller that is willing to allow you to pay for the house in monthly installments. Most sellers are not willing to take of this much risk and because the seller is carrying the risk in the deal, they will request a higher price for the property and / or a deposit.

If you are interested in rent to buy houses or in seller financed sale add your details to the list on this website: renttobuyguide.co.za

Bond Finance For Blacklisted People

Securing bond finance for blacklisted people can prove to be very challenging. The truth is that most banks are not keen on lending to clients with bad credit records. And, the ones that are willing for offer blacklisted loans are usually going to charge higher interest rates than an average home loan.

What are you options if your bank is not will to grant you the bond finance you’re looking for?

The first step would be to try to clear your name, and remove any ITC listings or blacklisting from your credit report. If you don’t already have one, get a copy of your credit report from ITC or credithealth.co.za and find the account that are giving you the negative ratings.

Sometimes, if you are able to produce paid up letters for those accounts, the banks would consider your home loan application far more considerably.

When compare to personal loans, home loan are particularly difficult to secure. Although the bond finance is backed and secure by the actual property, banks are currently more willing to grant short term loans.

Therefore, you might find it much easier to secure a short term blacklisted personal loan. You can then use the finance from your personal loan to settle an bad credit and outstanding debts.

Remember that the two major factors the banks with consider when considering your bond finance application is your credit record and your affordability.

If you apply for too many personal loans, you may find that you have too little disposable income after repaying the personal loan each month. For this reason it is important to speak to a financial advisor before applying for any further loans.

Another alternative to trying to secure bond finance when you’re blacklisted, is to try to buy the property without even using the bank.

Some developers are currently offering new homeowners Rent To Own agreements, that would allow you to rent the property for a period while also making payments towards owning the house eventually.

Using Personal Loans For A Deposit On A House Purchase

Although more full 100% bonds are being granted by the banks, most home loan applicants are still required to come up with at least a 5% to 10% deposit on any house purchase.

A 10% home loan deposit on an average property in South Africa is going to amount to between R60 000 and R80 000.

It could easily take years to save up 10% of any property price, and this is one reason why many new home buyers are exploring the option of using a Personal Loan as a deposit on their home loans.

Using A Personal Loan As A Deposit Is Not Always The Smart Option

Taking a personal loan to help secure the property finance you need to buy a house is not always advisable, but it can be a great convenience and it can help you get your foot into the property market.

The personal loan should only be considered if you have enough disposable income to safely cover the monthly payment. Remember, you will also be paying a large Home Loan repayment for the next 20 – 30 years.

Personal loans are usually offered up to a maximum of R100 000 and are payable over a much short term. These short term loans are unsecured and therefor are charged that very high interest rates.

Why These Personal Loans Are Popular

One of the reasons why these loans are popular among first time buyers is because they are very likely to gradually increase their income each year – making the monthly debt repayments much easier as time goes on.

Another reason is because, banks are surprisingly more willing to offer unsecured personal loans over a shorter 5 year term, verses granting a large home loan over a much longer 20 or 30 year term.

But, the excitement and strong desire to own your own property will likely play a very important role when considering if you are able to wait and save a cash deposit or take the extra personal loan.

Take the time to consider all your options and speak to your broker before deciding, this is going to be one of your biggest financial decisions.

Alternative Option

An alternative option might be to look at a Rent To Buy Property that will enable you to rent the house to love, while you save up the deposit you’ll need for the bond.

How To Buy A Property, With No Home Loan

Over 50% of credit active clients in South Africa are struggling to maintain their monthly repayments. For people who are highly indebted, getting a home loan can be an impossible task requiring a lot of search, begging and legwork.

But, there are methods, that have been used since 1981, to buy a property without a home loan.

Rent To Buy Property Agreements are one option.
Read more about: Rent To Own Properties For Blacklisted Clients

Installment Property Sales is another path to buying a property,
with no home loan.

Installment Property Sales were introduced to South Africa through the Alienation of Land Act in 1981. The seller and purchaser agree in writing to sell and buy the property, but rather than approaching a bank for finance, the seller grants the purchaser the opportunity to pay off the purchase price and interest over a period of time.

These agreements are best suited for properties price lower than R500 000 as they fall below certain restrictions that would otherwise be imposed by the National Credit Act .