One key factor one should consider before applying for a home loan is whether you will need to access the funds available in your home loan, if you need more then a 100% loan, and the rate and term youâ€™re willing to accept.
All the leading banks in South Africa offer a variety of home loan options, and it is best to approach a mortgage originator when considering the type of home loan which best suits your needs.
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Types of Home Loans:
Youâ€™ll notice that most of the options available are structured around the internet rate, since this is one of the most important factors of your mortgage.
- Variable Interest Rate Home Loans:
Variable rate homeloans are based on the South African repo rate (the overall home loan rate), except in the case of SA homeloans, these loans are linked to a Jibar rate.
If the rate increases or decrease so too will the rate on your home loan, which affects your month repayments.
- Fixed Interest Rate Home Loans:
The interest rate on a fixed rate homeloan does not change. The advantage of this type of mortgage is that you are protected from rate increases and your monthly payments are consistent.
Though, if the repo rate decreases you will not benefit, and your fixed rate will usually be slightly higher than the rate at the time of your application.
- Capped Interest Rate Home Loans:
These homeloan products offer you the best of both worlds, by capping your rate you will never have to worry about your repayments going about a set amount and if overall interest rates decrease so to do your home loan rates.
As you may expect the qualifying criteria for these home loans are often more stringent.
- Reducing Interest Rate Home Loans:
This type of homeloan product is also very popular among homeowners.
With a reducing rate home loan, the rate offer to you by the bank is gradually lowered every year or even every 6 months.
This lowering of you rate will save your loads of money and it occurs irrespective of the repo rate.
Reducing rate home loans are similar to switching. By switching your home loans you can secure a significantly lower rate for your home loan and thereby save thousands and shorten the period in which you pay you loan off.
Switching your home loan is a very effective financial tool, and it will save you lots of money.
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