South African Home Loan tips:
The major SA mortgage lenders have raised their prime lending rates from 11.5% to 12% following the announcement from the South African Reserve Bank that it will be increasing the Repo rate by 50 basis points.
This means that for a R300 000 South African Home Loan you will now be paying about R100 extra every month – in interest – towards your bond.
But here’s how you can beat the interest rate hike, and save thousands.
Compare the Numbers:
Looking at the figures below you’ll notice that with an interest rate of 11% (1% below prime), on a bond of R300 000 you’ll be paying almost R50 000 extra over the term of your loan.
| Bond Amount: | R600 0000 | R600 0000 |
| Interest Rate: | 10.5% | 11% |
| Term: | 20years | 20years |
| Monthly Repayments: | R 5 990.28 | R6 193.13 |
| Total Repayment: | R1 437 667 | R1 486 351 |
How I can beat the rate hike?
Option 1: Switching your existing South African Home Loan
By switching your existing home loan to another Bank you will be able to benefit from a lower interest rate. As you can see a 0.5% difference in interest can amount to quite the large some of money over the term of your bond.
Option 2: Pay More, Save More
Based on our example above the other option you have is to increase your monthly bond repayments by R100.
This means that on your R600 000 mortgage if you’re paying 11%, you’ll be paying R6 293 per month.
This way you will actually lower your total repayment amount from R1 486 351.00 to R1 428 425.00 – a saving of over R50 000!
The downside of this option is that you’re paying about R200 more a month than someone who has switched their home loan and is now only paying 10.5% interest.
Option 3: The best option
The best option is to switch your existing home loan to another bank, allow us to secure a better rate for you, and then pay an extra R100 month on your new lower monthly bond repayment.
With this option, because you’ve switched your home loan you only have to pay 10.5% on your bond, which means your monthly repayments will be about R 5 990.28
Now if you paid R100 extra your total repayment will only be R1.384 mil, which is R100 000.00 less than someone who is paying 11% and not paying anything extra into their bond every month.