In South Africa it has become a feasibly profitable affair for the people to use home loans in the recent years because of the fact that the financial institutions have been struggling over the control of the property market. These gains, they include bridging finance, surety-ship and switching. Here, we will discuss the last of the three.
The phrase above may seem complicated. In simple terms, you are moving your home loan from one financial institution to another. The reason behind this is that you can gain a better interest rate on your loan by moving.
The percentage size of the reduction doesn’t need to be massive. Even a very small reduction such as 0.5% can save you a lot of money. By changing from one financial to another you may be able to find this reduction and you may be able to get additional lending.
After knowing about the things mentioned above, you will definitely make up your mind to go for a switch. But you should keep certain things in mind. Firstly, the financial institution that you have a home loan with at present, might have introduced penalty clauses in your home loan agreement. This means you are supposed to pay additional penalty interests if you plan to cancel the agreement with that institution, that is, if you go for a switch. The penalty interests are usually based on a 90 day or three month interest that you are supposed to pay regularly. This can sometimes prove itself to be a big figure.
For a new bond you have to pay attorneys fees, bond cancellation cost and registration fees. In addition to these, there may be administration and valuation fees. Even though all these costs are involved it is profitable to switch to a new bond. Because of the severe competition, some financial institutions are even ready to give up some fees like valuation and administrative fees and they even may be ready to pay a certain part of the registration fee as well. You must make sure that the financing company is ready to accept the cancellation of home loans after a notice period to avoid the three month penalty interest as to save you an additional sum of money.
When you want to refinance your home loan, you need to give the lender the pertinent information, such as proof of income, bank statements, id, and whatever else they require to test your qualifications to repay.
Companies are now offering a low interest rate of up to 2%. This is no doubt the best time to refinance your home loan and save money for you and your family.
