If you’ve spent any time looking into property finance, you may have heard of South Africa’s 105% home loans. They’re a feature that often surprises foreign buyers  because they’re extremely rare internationally.

So, what exactly are they, where did they come from, and why do they exist in South Africa?

What Is a 105% Home Loan?

A 105% mortgage allows you to borrow more than the purchase price of the property.

• The extra 5% usually covers transfer and bond registration costs - the upfront cash expenses that often stop first-time buyers from entering the property market.
• For example, if you’re buying a R1,000,000 property, you can apply for a R1,050,000 bond, meaning you don’t need to find extra money for costs out of pocket.

🌍 Why Are They Rare Internationally?

In most countries, banks lend less than the purchase price of a property.

• In the US, UK, and Australia, buyers generally need to put down a deposit - often 10–20% - before the bank finances the balance.
• The logic is that a deposit shows commitment and reduces the bank’s risk if the property has to be sold.
• That’s why to overseas investors, the idea of borrowing more than 100% sounds almost impossible.

When Did 105% Bonds Come About in South Africa?

South Africa introduced 105% mortgages in the early 2000s, as part of a strategy to:

1. Increase home ownership, especially among first-time buyers who struggled to save up both a deposit and costs.
2. Support transformation and inclusion, aligning with government’s broader goals of improving access to housing finance.
3. Stimulate the property market, which benefits not just banks, but also estate agents, developers, and the economy at large.

Banks recognised that many otherwise creditworthy buyers were losing out purely because of upfront costs, so they designed the 105% bond to bridge that gap.

The Trade-Offs

While a 105% loan can be a lifeline, it comes with important implications:

• Higher initial debt: You start off owing more than the property is worth. It can take 2–3 years of repayments just to reduce your balance back to 100%.
• More interest paid: Because you’re borrowing more, your total repayment cost is higher.
• Selling too soon can be tricky: If you sell within the first few years, you may still owe the bank more than the property sale covers.

The Bottom Line

South Africa’s 105% home loans are unusual, but they exist for a reason: to make home ownership possible for first-time buyers who otherwise couldn’t afford the upfront costs.

They’ve helped thousands of South Africans step onto the property ladder - but like any financial tool, they need to be used wisely.

At Phoenix Bonds, we’ll walk you through the numbers, explain how amortisation works on a 105% loan, and help you decide whether it’s the right option for you.

👉 Thinking about a 105% bond? Contact Phoenix Bonds today for a prequalification - and let’s find the bank that’s ready to back your dream of home ownership.