Which factors affect the interest rate on your Home Loan

South African Home Loan Tips

As you can see by [this example] the affect of a 1% difference on your home loan interest rate could mean you’ll save as much as R100 000.

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Let’s take a closer look at which factors influence the rate you’re offered on your bond and how you can secure the [best bond deal].

  1. Repayment-to-Income (RTI%)
    The first thing any bank will consider when granting your new homeloan is whether you’re able to qualify for the necessary funds. Usually the banks will only grant you a homeloan with a repayment amount that does not exceed 30% of your salary.
  2. Loan-to-Value (LTV%)
    The second most important factor is the LTV. If you’re looking to secure the a very low interest rate for you’ll need to save up a deposit. The bigger the deposit the lower your rate will be.
  3. Home Loan Size
    Banks often reserve the best interest rates for home loans that are at least R1.3mil or more.
  4. Repayment Term
    The likelihood that the bond will be repaid within the next two years determines the extent to which the loan can be profitable for the banks. If the bond will be repaid in a relatively short period of time, the bank is less likely to offer a bigger rate of discount as it is less profitable for them
  5. Property Loans SA – Bonus TIP
    Your preferred bank will often match the rate you’re offered by another homeloan provider if you can provide proof of the better rate. This is one reason why we are able to secure the best bond deal for you. Once your application is sent to the banks and we negotiate with the various banks for an even lower rate.

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3 Comments For This Post

  1. Nikki Says:

    When the banks say “doesn’t meet credit criteria” or “poor scoring” what does that mean exactly? If I was granted a loan but was given a very poor concession rate, what would the reasons for that be?

  2. Gino S Says:

    Hi Nikki,

    That is an excellent question.
    Your credit rating is affected negatively by unpaid debit orders and/or skipped payments. Also, if you don’t have any credit credits or loans you will not build up your credit profile.

    Generally, the banks will grant you a home loan with a poor interest rate if you can afford the bond, but have a low credit rating.

    With a low credit rating you’re a higher risk to the bank, and therefor are given a poor concession (interest rate discount).

  3. Labius Says:

    Hw much home loan do I qualify for if earning is R6024 and R1650 living out allowance per month? And hw much do I have to pay per month insurance included?

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