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How to go about financing a foreign purchase
Are temporary residents able to apply for local financial assistance when purchasing property?
Yes.
The mortgage bond is not restricted and depending on the standing of the client, can be 100% of the purchase price of the property.
The granting of any borrowing facility is subject to the approval of the Lending Manager in the Branch of the bank where the foreign national holds their account.
It is important to note that when a foreign national leaves South Africa, the criteria for Non-Resident purchasers will apply and the bond may need to be reduced to fall in line with the South African Reserve Bank’s formula requirements.
Can a non-resident of South Africa finance their property purchases locally?
Yes. A non-resident may borrow a maximum of 100% of his/her borrowing base. This means that a non-resident can borrow 50% of the purchase price subject to terms and conditions.
e.g. if a non-resident is purchasing a property in South Africa for R600,000, and introduces R300 000 into South Africa for the purchase, they would be able to apply to the South African Reserve bank for permission to secure a bond of R300 000.
However, where non-residents bring funds into the country over a number of years, they may borrow up to a maximum of 100% of the total funds invested in South Africa – which could be more than 50% of the purchase price of the property.
Who approves non-resident loans?
Non-resident loans are subject to foreign exchange approval from the South African Reserve bank. Financial assistance is granted in the form of a loan secured by a mortgage bond to be registered in favour of the bank granting the loan.
Lew Geffen Sotheby’s International Realty will appoint a mortgage originatorfor foreign buyers who will apply to all the major financial institutions in South Africa on their behalf to secure mortgage bonds at the most competitive rates available.
Are non-residents required to open a local bank account?
No. Funds can be transferred directly from an overseas account into a mortgage account in SA.
However, if an account is to be opened, especially if an access facility is required for the capital paid off, then the non-resident is required to obtain an original letter of credibility from his bankers.
This local account will often be funded from abroad or from rental income from the property purchased, subject to the bank holding the account being in possession of a copy of the rental agreement.
As exchange control is a complex subject, non-residents are advised to consult a mortgage originator on this issue.
