Don’t be afraid to negotiate home loan rate

Home loans are currently hard to come by – but that should not prevent qualified borrowers from negotiating for a better interest rate.
Negotiating a loan at even one percentage point less than the prime lending rate can save borrowers a substantial sum over the life of the bond, advises Martin Schultheiss, CEO of the Harcourts Africa property group.
“In the current economic climate, however, many borrowers – and especially first-time buyers – are just so grateful to qualify for a home loan that they don’t want to rock the boat.”
Qualified borrowers should keep in mind, he says, that the reason home loans are hard to come by is that many prospective borrowers don’t make the cut in terms of the stricter lending criteria stipulated in the National Credit Act. “Banks therefore have to turn applicants with risky credit histories down to protect their own interests.
“This means that if you do qualify for a bond in terms of the Act, you are a sought-after prospect for banks and you should use this opportunity to your advantage by negotiating the best possible terms.”
Schultheiss explains that the repayments on a 20-year bond of, say, R1m at an interest rate of 10% will cost the borrower R9650 a month. Negotiating the rate down by one percentage point would save the borrower about R650 per month. “That’s R7800 a year or R156 000 over the life of the bond. Put another way, a saving of R156 000 represents more than 15% of the initial purchase price.”
He further advises homeowners who negotiate lower rates to consider paying the resulting savings into their bond accounts. “The total saving on interest in the example above would come to more than R220 000 if the bondholder paid the R650 ‘saving’ into his bond account each month. On top of that, he would shorten the life of the bond to about 16 years.”
Meanwhile first-time buyers who are unsure of their ground when it comes to bargaining with banks are especially advised to make use of the services of mortgage originators, who will source the best home loan package available to each borrower at no charge.
Issued by Harcourts Africa

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
    • 18 Jan 2018
      New year, new goals! If you’ve resolved to purchase your first property in 2018, then this 6-step guide from the Rawson Property Group is a must-read. It will help you navigate and simplify what is often be seen as a confusing process of buying your first home – right from the house-hunt to the house-warming.
    • 17 Jan 2018
      While the current property market may still favour buyers, it doesn’t mean that they shouldn’t be well prepared before putting in an offer to purchase.
    • 17 Jan 2018
      Lightstone lists Blair Atholl as the most expensive suburb with an average house price of R11.2 million, followed by Westcliff (R10.5 million), Dunkeld (R9.3 million), Sandhurst (R9.1 million) and Inanda (R7.2 million).
    • 17 Jan 2018
      As it currently stands, there are four main ways in which a home can be bought in South Africa, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who adds that deciding in which legal entity to purchase the property is not a decision that should be entered into lightly, as each has its pros and cons.
    • 16 Jan 2018
      The start of the new year is symbolic of new beginnings. A good time to take stock of one’s possessions as well as how necessary they actually are. However, seeing as the process may appear daunting – a plan goes a long way.
    • 16 Jan 2018
      The Western Cape is still in the throes of a severe drought and many households have to adjust the way they use and save water. It is a little more complicated in sectional title schemes, however, as it is not that easy to implement grey water systems for multiple users and it is also difficult to monitor water usage accurately if there are no separate water meters
    • 15 Jan 2018
      In ideal rental situations, when a lease is signed the tenant will stay for the full duration of his lease without any complications and the landlord will uphold his obligations, creating a win-win situation for tenant and landlord.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us