select
|

What a difference a rate makes

Of course life would be much easier for estate agents if all their buyers were able to secure 100% home loans – but would it be the right thing for buyers?

Not necessarily, says Rudi Botha, CEO of SA’s biggest mortgage originator BetterBond, because lenders seldom grant interest rate concessions on 100% loans, and even a 1% concession on the interest rate that homebuyers are charged can have a major effect on their financial future, especially when taken over the 20-year lifespan of most mortgages.

“On a R1m bond, for example, an interest rate of 8% instead of the current 9% ‘standard’ rate would first of all automatically translate into interest savings of more than R151 886 over 20 years – which is money that could come in very handy when paying for a child’s tertiary education, for example.”

In the second place, he says a lower rate generally makes it easier for buyers to obtain a bond to begin with. In the example above, the minimum monthly repayment would be about R8400 instead of R9000, which means that the buyer would probably need to earn about R2000 a month less to qualify for the loan.

“And this might make all the difference between being able to buy right away and having to wait another year for a salary increase – by which time property prices will very likely have gone up too.”

Thirdly, says Botha, the lower minimum monthly repayment on a lower rate loan may just put the homeowner in a position where he is able to pay the loan off faster and save even more interest. “The buyer who is able to pay an extra R200 a month on the 8% loan, for example, will pay off the loan a whole year early – and shave off another R65 000 in interest.”

However, the fact is that there is really only one way these days that most buyers can even hope to qualify for a rate concession, he says, and that is to pay the biggest deposit possible.

“Of course, telling buyers this does not make agents or originators very popular, but once buyers see the very substantial benefits they stand to gain, they often start to think about deposits differently.

“And at the very least, they are likely to be in a better position to obtain a bond. The latest BetterBond statistics indicate that about 60% of loans approved are going to borrowers with a deposit – and that the average deposit required is lower than last year.”



  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 Nov 2017
      Reserve Bank Governor, Lesetja Kganyago, said that the Monetary Policy Committee had once again decided to let the interest rates remain unchanged with the repo rate at 6.75%, and the prime lending rate at 10.25%.
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK