Mortgage Switching Explained
Lately several financial entities and banks have been fighting to gain supremacy in the real estate property market. The competition is turning out to be beneficial to the customers and people who are thinking of investing in real estate. Most entities have opportunities such as bridging finance, surety-ship and switching alongside reducing their rate of interest to stay ahead of the competition.
What are we talking about here? You may wonder, why would this be of any advantage to me? When moving a mortgage from one financial institution to a different one, your interest rate on the loan may be significantly lower.
The percentage size of the reduction doesn’t need to be massive. Even a very small reduction such as 0.5% can save you a lot of money. By changing from one financial to another you may be able to find this reduction and you may be able to get additional lending.
After knowing about the things mentioned above, you will definitely make up your mind to go for a switch. But you should keep certain things in mind. Firstly, the financial institution that you have a home loan with at present, might have introduced penalty clauses in your home loan agreement. This means you are supposed to pay additional penalty interests if you plan to cancel the agreement with that institution, that is, if you go for a switch. The penalty interests are usually based on a 90 day or three month interest that you are supposed to pay regularly. This can sometimes prove itself to be a big figure.
Despite the fact that there are many costs attributed to this process, such as bond cancellation costs, registration fees for a new bond, attorney’s fees, valuation fees, and administrative fees for registering new home loans, it is still a gainful choice to make the switch. Several financial institutions in South Africa are providing incentives to their customers, like dropping the valuation and administrative fees altogether. They even are ready to pay for a certain part of the registration process to get an upper hand on their rivals companies. In order to save an additional cost, you need to make sure that your financing company accepts cancellation of home loans after a notice period in regards to the three month penalty interests mentioned above.
To refinance you home loan the following documents are required: documents from the company you wish to refinance through, proof of your income, bank statements and your id.
Companies are now offering a low interest rate of up to 2%. This is no doubt the best time to refinance your home loan and save money for you and your family.