How To Switch Your Home Loan
The financial institutions have not had control over the property market in the past few years. This gave way for new ventures for people who have taken or would like to take out home loans. Bridging finance, suretyship and switching are a few of them. We will be dealing with the last of the three.
The phrase above may seem complicated. In simple terms, you are moving your home loan from one financial institution to another. The reason behind this is that you can gain a better interest rate on your loan by moving.
Even a half a percent lowering of the rate can be helpful, as it could save you tens of thousands or more. It’s easy to recognize that this is a wise move. You might also switch because you need a bigger loan, and the new lender may give you this if your property value is high enough.
If you are opting to switch from the present financial institution you should consider certain things. The present financial institution you have a home loan have had penalty clauses in your home loan agreement. That is you have to pay extra penalty interest as you are going to decide to cancel your contract with them. This may be a quite large amount as these penalty interests are usually based on 90 day, or three month interest which you had to pay regularly.
For bond registration you will have to pay valuation fees and administrative fees on top of this there are other costs like attorney fees, bond cancellation cost and registration fees. With all the costs involved it is still sometime profitable to switch to another homeloan. Due to lot of competition, in South Africa at present some financial institutions are ready to forgo valuation and administrative fees and also pay for a part of the registration process. You should check if your company allows cancellation of home loan even after the notice period given the three month penalty interest. If allowed it will save you additional money.
When you want to refinance your home loan, you need to give the lender the pertinent information, such as proof of income, bank statements, id, and whatever else they require to test your qualifications to repay.
The home loan switching option gives us an opportunity to make some savings. Certain financing companies are offering up to 2% lower interests. The switching from the higher rate to the lower rate gives you an opportunity to huge savings.
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