What Is The Cheapest Home Loan In South Africa?


One of the most common questions our clients approach us with is: what is the cheapest home loan in South Africa?

South Africans are fortunate to have several home loan providers, and each has its own unique bond offerings with various benefits and advantages. 

Currently, the top home loan providers in SA are: 

The 4 Major Banks
  • ABSA Home Loans
  • FNB Home Loans
  • Nedbank Home Loans
  • Standard Bank Home Loans
Private Banks
  • Investec 
  • Rand Merchant Bank 
Others
  • SA Home Loans
  • Old Mutual Home Loans

The four major banks and private banks each other bonds up to 105% of the purchase price. Whereas SA Home Loans and Old Mutual Home Loans each have unique bonds that cater to government employees and lower-income earners. 

With such a diverse landscape of home loan products available, it becomes challenging to navigate the options without the support and guidance of an experienced bond originator.

The cheapest home loan is not necessarily the bond with the lowest monthly installment. 

Depending on your unique situation, the cheapest home loan in South Africa might be a home loan from Old Mutual with a FLISP top-up, or it may be a bond with Investec with discounted banking and attorney fees. 

Importance Of Home Loan Interest Rates

A 0.5% reduction in interest rate on a home loan amount of R2,000,000 over 20 years can lead to a significant difference in the total amount paid. Assuming the original interest rate is 11%, the monthly payment would be R21,926.23. Over the course of 20 years, the total amount paid would be R5,262,896.00.

If the interest rate is reduced by 0.5% to 10.5%, the monthly payment would be R20,825.67. Over the course of 20 years, the total amount paid would be R4,998,160.00. 

This is a difference of R264,736.00 in total payments.

So the cheapest home loan option is to a large degree one with the lowest interest rate. 

Importance Of A Home Loan Deposit 

If you take out a home loan of R2,000,000 over 20 years at an interest rate of 11%, the monthly payment would be R21,926.23. Over the course of 20 years, the total amount paid would be R5,262,896.00

If you take out a home loan of R1,800,000 over 20 years at an interest rate of 11%, the monthly payment would be R19,733.61. Over the course of 20 years, the total amount paid would be R4,736,466.40

The difference in total payments between the two loans is R526,429.60. By taking out a smaller loan, you can save R526,429.60 over the course of 20 years.

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