With the South African repo rate on the increase and inflation high consumers feeling the pinch are searching for ways to save money. Banks and bond originators tempt homeowners struggling to meet suddenly higher than anticipated repayments with the prospect to switch and pay less on their home loans.
It’s the interest rate rat race. But who’s really winning?
If you’re considering switching home loan providers, consider first some of the pros and cons:
Pros
- A preferential interest rate on your home loan and long-term cost-saving.
- Access to more equity – specifically when a homeowner’s primary bank has denied further advances on a home loan to quickly access cash upfront, consolidate debt, and improve monthly cash flow.
- Opportunity to take your bond back to the original term to free up cash for renovations.
- A variety of choices tailored to your specific needs when it comes to the values and services offered by new providers.
- Some providers offer to waive certain costs such as the valuation, registration and administration fees.
- Applying a second time around can be a frustrating, time-consuming and admin-intensive exercise.
Cons
- Switching from your primary banking institution may affect your relationship and therefore the rewards and value-added services that you receive for being a loyal customer.
- A new bond registration can take about six to eight weeks.
- You would have needed to keep your credit score and loans in check, and payments up to date.
- Costs involved:
- Cancelling your original bond registration at the Deeds Office.
- Early termination fee by your current home loan provider, according to the penalty clauses stated in the fine print.
- Credit and affordability checks in line with the National Credit Act (NCA) requirements.
- Possible administration and valuation fees.
While almost every South African is looking at ways to save money, it’s easy to jump at ‘solutions’ that seem like a quick fix to our financial challenges. Remember that advertising never exposes the downside of any offering and so it’s important to always do your homework before committing to anything. With both rising interest rates and high inflation, plus the uncertainty of our economic landscape, now more than ever it is vital to assess your situation carefully on its own merits and make calculated decisions when considering your financial future.
Read more:
With interest rates rising – should you fix your bond in South Africa?
