South African banks, that offer home loans, have different types of home loans to choose from. The different options give you a wider selection to choose from which would fit your unique financial situation.
Real estate is looking good in South Africa and it’s about time that you and your family realise your goal of purchasing your dream house.
Let us take a look at some of the different types of home loans in South Africa:
A Variable Home Loan/Bond
Banks consider this, as a normal home loan but is one of the popular choices among new homeowners. These types of home loans have its interest rate attached to the base home loan rate, which goes up and down, depending on the amount of the loan.
If the home loan base rate goes down by one percent, the interest rate follows, but unfortunately, it also works the other way. As the base rate goes up, your home loan rate also goes along with it.
Capped Rate Home Loan
These types of home loans are seldom available and even if it is, the criteria are very strict and hard to meet. It is an ideal setting since there is a maximum rate that is built into the loan.
When interest rates go down, you enjoy the benefits, and when interest rates go up, you are not affected since you are only required to pay the agreed capped rate.
First Time Buyers Home Loan
This home loan is quite popular as many first time home buyers apply for a home loan. This is a wonderful opportunity for employed people who would like to invest in a home but may not have the required amount to deposit on it.
Banks are now open to lending more than 100% of the purchase price, which includes registration and transfer costs. This works best for people who have never applied for any home loan or never owned any property.
Fixed Rate Home Loan
These types of home loans have a fixed interest for a certain period, which basically covers one or two years. The fixed rate would always be higher than the base home rate but will protect you from increasing rates.
This will free your mind from problems of increasing interest rates since you already know what your repayments are. While this may be good, it will also be a disadvantage once the interest rate drops, since you will still be paying the same interest rate.
You might end up paying more for the property by the end of the contract.
Reducing or Step Down Home Loan
There will be a guaranteed small amount interest decrease every six months for an agreed period. Even when the home loan interest rate rises or falls, the gradual reduction would still apply.
Luckily a mortgage originator, such as Homeside Home Loans can tailor-make your home loan to meet your needs and budget.
Banks and lending companies understand that purchasing a home for you and your family is a big and important investment. They know that in addition to serving as a roof over your heads but also a place where you can raise a family safely.