The financial institutions have not had control over the property market in the past few years. This gave way for new ventures for people who have taken or would like to take out home loans. Bridging finance, suretyship and switching are a few of them. We will be dealing with the last of the three.
What are we talking about here? You may wonder, why would this be of any advantage to me? When moving a mortgage from one financial institution to a different one, your interest rate on the loan may be significantly lower.
Switching your home loan from one financial institution to another because of even a slight reduction in the interest rate often means huge savings. A 0.5% difference in the rate of interest may sound miniscule but it might mean a lot in terms of how much lesser you have to pay every month. The new lender might also consider allowing you additional loan against the value of your property.
If you are opting to switch from the present financial institution you should consider certain things. The present financial institution you have a home loan have had penalty clauses in your home loan agreement. That is you have to pay extra penalty interest as you are going to decide to cancel your contract with them. This may be a quite large amount as these penalty interests are usually based on 90 day, or three month interest which you had to pay regularly.
Despite the fact that there are many costs attributed to this process, such as bond cancellation costs, registration fees for a new bond, attorney’s fees, valuation fees, and administrative fees for registering new home loans, it is still a gainful choice to make the switch. Several financial institutions in South Africa are providing incentives to their customers, like dropping the valuation and administrative fees altogether. They even are ready to pay for a certain part of the registration process to get an upper hand on their rivals companies. In order to save an additional cost, you need to make sure that your financing company accepts cancellation of home loans after a notice period in regards to the three month penalty interests mentioned above.
To refinance you home loan the following documents are required: documents from the company you wish to refinance through, proof of your income, bank statements and your id.
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.