In the midst of a global pandemic, rising international petroleum prices, and high inflation rates, buying your dream home turns into a rather burdensome experience. As a result, home loans have gained popularity amongst prospective homebuyers. And as a result of this, home loan providers have enthusiastically entered the market for mortgage lending. This way, prospective home buyers are faced with a variety of options when it’s time to choose a home loan provider. But how do you choose the perfect home loan? We have compiled 6 loan types that are most suitable to your needs as a South African.
First time buying a home? We’ve got you covered.
You’ve reached that point in your life where you want to buy your first home, but your only obstacle is securing money to lay down a deposit. It’s times like these when you should feel compelled to turn to first-time buyers’ home loans. This is all the more convenient as money lenders are willing to extend their loans to more than 100% of the purchase price to assist first-time homebuyers with a portion of their transfer/bond costs.
Fixed-rate home loans
If you are looking for a way to steer clear of high interest rates and you prefer to not have market forces dictate fluctuations in your home loan repayment, then this is the route to take. Fixed-rate home loans offer you a fixed interest rate for a particular period, but it only covers one to two years. Upon expiry of your fixed rate, you will need to revert to a variable rate or re-apply for a new fixed rate.
This given rate will always surpass the home loan base rate as it is more of a risk to money lenders, however, you will never be required to pay more should interest rates increase. It is vital to note, though, that if interest rates drop, you will still be required to pay the same fixed rate.
Capped rate home loan
Capped rate home loans supply you with additional collateral of a variable interest rate without committing to a fixed rate. The pros of capped rate home loans: you are protected from rising interest rates. The cons: great difficulty comes with qualifying for home loans like these.
JIBAR rate home loan
The 3-month JIBAR (Johannesburg Interbank Agreed Rate) is an independently determined rate quoted in the SA Futures Exchange. Some money lenders determine your interest rate by adding a link rate (depending on your risk and profile) to JIBAR in order to get the total interest rate applied. These rates are reset every 3 months. This means that your interest rate will move simultaneously – either up or down.
Variable home loan
Variable home loans connect their interest rate to the home loan base rate, which tends to fluctuate. If the home loan base increases, so does the interest rate, and vice versa.
Step-down home loans
We have a solution for every type of prospective homeowner! If you are retiring, step-down home loans are the way to go. Why is this loan convenient for those nearing retirement? The rate that money lenders offer you is progressively lowered every 6 to 12 months. Essentially, you save tons of money by taking out this loan.
Whichever home loan you opt for, put confidence in the fact that there is a particular home loan out there that will best suit your desired needs of buying a home and possibly making one of the greatest investments of your life!
