Understanding your home loan interest rates

If a person thinks that it is all done and dusted after he/she obtained a home loan, then that person is thoroughly mistaken. One of the most important factors in obtaining a home loan is to have a clear and complete idea about the interest rates of the home loan he is applying for. If he has no good idea about his home loan interest rate and takes a loan without proper study, then that person is liable to fall in a mess and create a door in his pocket. Now let us discuss how we can have a good idea about the interest rates in South Africa when it comes to a home loan.

It has been observed in South Africa that interest rates are inversely proportional to the property price. The moment the rate of interest is dropped down, the price and demand of the property goes up. However the process is slow but gradual. But it definitely shows how the rate of interest immensely affects the property value and the way in which people are aware of it. Such is its importance. Most of the time in South Africa, the interest levels remain low and are unchanged throughout the year and when it comes to the end of the year, the rate will increase a bit for maintaining inflation. It has been like this since the banks introduced the policy of complete home loan system. But one could not help but notice that even though the banks are providing a 100% loan, the rates of interest were not so customer friendly. We usually find banks providing a good rate of interest on the loan only if the customer provides a deposit of a minimum of 5%-10%, which one would say, is a rare thought in a customer’s mind.

You can see that the major loan providers in South Africa are NEDBANK, ABSA, FNB, Standard bank and Secure bonds. All these banks provide various offers on their home loans, different kinds of plans when it comes to the rate of interest and additional benefits of the customers but all of them follow a similar trend. Nevertheless, the best time for any customer to think about a home loan is when the interest rate drops (even a little) and when the banks are providing 100% loans. This is the best time to step into the property market as the earlier the person enters into the property market, the rapid is the pace of the investment growth even if it is in the long term basis. If the person planning for a home loan already has a bond under his name, he can reduce his monthly expenditure by asking for a good rate of interest in his home loan. By doing this he can build up his credit rate and reduce the massive loan amount.

In the earlier years, the property prices and the interest rates were very low than any time before but they were expected to increase by the end of the year 2010. So, it is advised to make haste.