Mortgage Basics – South Africa

The type of loan you select will affect not only the amount of interest you pay to the lender and the term or life of the loan, but can also have other options and add-ons that can help you realise future financial goals.

Interest Rates and Life of the Loan

Typically, the maximum life or term of a mortgage is 30 years, but almost any other time period can be negotiated, with shorter loans sometimes attracting cheaper interest rates. A lower interest rate and shorter term on the loan means you will pay less interest to the lender over the term of the loan; Saving you money.

However, monthly payments on a shorter loan will generally be higher than those on the same loan set for a longer time period. The higher payments are obviously required to repay the debt sooner.

Conversely, a long term loan with smaller payments can be easier to budget for and mean less lifestyle sacrifices will need to be made. If you can afford to pay off your loan sooner, then a shorter term loan is often more advantageous.

Fixed Rate vs Variable Rate

The two most common loans offered are fixed rate mortgages and variable rate mortgages. A fixed rate mortgage comes with an interest rate that is fixed for a set amount of time whereas an variable rate mortgage will fluctuate as the market changes.

The benefit of a fixed rate mortgage is to protect you from the risk of increasing interest rates and subsequently higher repayments. If interest rates rise, you are fixed on paying the lower rate. Conversely, if interest rates should fall, you are locked into the fixed rate and will pay above market rates for your home loan.

A variable interest rate home loan allows interest rates to fluctuate with the market, depending on the economic environment.

Initially, a variable rate will be lower than the fixed rate loan. However, if interest rates do rise in the future, it is likely the fixed rate loan will be cheaper.

Deciding whether a variable or fixed rate loan is best for you will come down to your unique financial situation. For example, if you expect your income to rise in the future, then a variable rate loan will help you to pay more back in the short term and should rates rise, you can still afford the loan because of your increase pay. You should also consider your risk tolerance. A fixed mortgage lets you plan and budget sometimes years in advance to make sure you can continue to afford the loan.

If you need help identifying which loan option is best for you, contact a Mortgage Plus broker for an obligation-free discussion. Your broker will advise you on the various options and benefits of different home loan products and work to get you the best deal on your loan.

Please contact us if you require any further information or would like to apply for finance:

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011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Home Loans in SA : When it comes to purchasing a home, you are probably very excited about the fact that you will be starting a new chapter of your life. Everything happens so fast sometimes that you might think that there will barely be any time to read through your loan documents.
You could not be more wrong though. Even though those documents are going to be long and drawn out, it is extremely important to make sure that you or your attorney go through them with a fine tooth comb. Before you even get to that part though, you will want to make sure that you are even applying for the correct loan to begin with.

There are a few types of home loans out there and it is important to make sure that you understand the basics of each in order to make sure that you are making the right decision for you and your family. Going with the wrong loan could cause you to default on your loan and lose your house. Since this is not something that you want to have happen, it is important to make sure that you are taking the proper precautions from the start.

What Types of Home Loans Are There. The loan that many people consider to be the best option is the fixed rate mortgage. This is a pretty straightforward loan. You have a set interest rate, which will never change for the period it’s fixed, and a set number of years to repay the debt. Another major loan product out there would be the variable rate mortgage.

This is a risky loan in a rising interest rate market because if the prime interest rate goes up, the mortgage company will also begin to increase your interest rate. This means that you can never predict what your payments are going to be in the future. Many people have found themselves in foreclosure simply because the payments adjusted to an amount that was too much to handle.
Interest only home loans are another option. The thing is though, during the first couple of years of the mortgage, none of your payments goes to the principal balance. If you plan on selling you home within the first couple of years then your payoff amount is basically going to be the same as the first day you took out the loan.

As you can see, there are a few different options out there for you. You really have to look through them all to make sure that you are getting the right type of loan for your needs.

If you need any more information about  Home Loans or other home loans related questions fo not hesitate to contact us on :

(011)327-4489 / www.mortgagepluscc.co.za