With the recent interest rate reduction of 0.25% and the possibility of further rate cuts in the coming months, I thought it prudent to talk about the effect that even a small rate variance like a quarter of a percent has on the pocket of the home owner with a bond.
To demonstrate this we need to look at a few examples of Rand value savings based on different scenarios.
Home loan of R500 000 over 20 years with an interest rate of 10.25% (Prime rate) has an instalment of approximately R4 900 p/m. The same loan with a rate of 9.75% (0.5% lower) is approximately R4 750 p/m (a saving of R150 p/m)
Home loan of R1,5M over 20 years at 10.25% is approximately R14 750 p/m. The same loan with a rate of 0.5% below prime is approximately R14 250 p/m (a saving of R500 p/m)
And lastly, a home loan of R3M over 20 years at the prime rate is approximately R29 450 p/m. The same loan at half a percent below prime is approximately R28 450 p/m (a saving of R1000 p/m).
Now imagine the monthly saving with a 1% difference in interest rates on above scenarios!
This brings me back to why each and every home buyer out there should be making use of the services of a Bond Originator, like myself, as we multi submit your bond application to various banks and negotiate between them to ensure you get the very best deal the market, not just your own bank, can offer.
As you can see from the above calculations, even a slight improvement in your interest rate brought about by comparing one bank’s quote with another, can save you hundreds of rands each month and vast amounts of your hard earned money each year. The average length of a home loan in South Africa (according to statistics) is approx 4 – 5 years, so you can do the maths over the full period.
Remember, my service is free as we are paid by the banks so why not contact me or refer your family, friends & colleagues for expert advice on a home loan or to find out what you can expect from the banks (pre-qualification) when you are thinking of buying a house.
I’ve been in this industry for 17 years and I take tremendous pride in my ability to help people finance their new house with the best finance options available from the major financial institutions.
Yours in Home Loans…