Switching Your Home Loan
Having a home loan, while being a great investment opportunity,
can also be a burden if you are paying more than you need
to. Sometimes, the best option in reducing your monthly mortgage
payments is by switching your home loan to another lender.
It is a method of refinancing your mortgage loan and ensuring
that your monthly payments and interest rate is as low as
possible.
There are many reasons on why you would consider switching
your home loan. To secure a lower interest rate is the most
important. With a lower rate of interest, your monthly mortgage
payment would also decrease, thereby increasing the amount
of available cash you will have for other necessities. A lot
of people switch their home loans to take advantage of special
offers and reduced interest rates by lending institutions.
Some do it to invest in other properties, to receive a lump
sum of money, expand their business or pay off other debt.
It is important to know the pros and cons of making a switch
in your home loan lender before you actually make the switch.
In South Africa, the majority of people who seek out financing
for their property purchases are now going to bond
originators instead of banks. Instead of going to a multitude
of banks and filling out their unique bank loan applications
each and every time, you can go to a mortgage originator and
fill out one application that will go to many banks. Most
bond originators in South Africa, already have agreements
with the four major banks and many of the smaller banks, so
you’re loan application will be seen by many different
types of lending institutions. This is extremely helpful,
in that you will be able to compare and contrast the various
interest rates each bank offers you, as well as the terms
of the mortgage loans offered.
It is important to keep in mind before switching home loans
that many banks or lending institutions charge hefty exit
fees. These exit fees can range from a fixed amount, as a
percent of the principal remaining on the loan, or in terms
of the number of monthly mortgage payments remaining. Typically,
the later that you try to exit the loan, the less expensive
it will be for you in exit costs.
You must also consider the costs and fees associated with
securing a new home
loan. Besides the exit fees levied on the mortgage loan,
most banks have costs associated with obtaining a loan from
their institution. You might end up paying more for the exit
fees and the new bank loan fees that what you would have saved
if you had kept you loan with the original lender. You MUST
READ THE FINEPRINT and know what advantages and disadvantages
a switch in your home loan lender will give you. Ask questions
and don’t be afraid to negotiate with lenders before
deciding to switch. You are the customer and deserve to be
as informed as you can be about the terms of your mortgage
loan.
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