What to know about bond-switching and renegotiating your interest rate
As economic pressures escalate and salaries struggle to keep pace, how can you alleviate the burden of your monthly mortgage payments without extending the term?
Home owner, insurance, property. Image: Tumisu on Pixabay
Lester Kiewit interviews Rhys Dyer, CEO of Ooba Home Loans.
Listen below.
A bond often constitutes a significant financial commitment, spanning around 20 years and devouring nearly a third of one's income.
As economic pressures escalate and salaries struggle to keep pace, how can you alleviate the burden of your monthly mortgage payments without extending the term?
There are primarily two avenues to pursue: bond-switching, entailing the transfer of your home loan to another financial institution, and negotiation with your current loan provider for a more favourable interest rate.
Dyer highlights the escalating competitiveness of the home loan market, perhaps the most intense it has been in the past decade or two.
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"Banks are trying to grow their books by competing through switching home loans at the moment."
- Rhys Dyer, CEO – Ooba Home Loans
Switching bond providers:
Dyer highlights that it's not a simple process as it requires completion of applications, submitting payslips, ID documents, and credit checks.
He emphasises that when switching to a new bank, it's crucial for them to verify your eligibility for the home loan through a comprehensive assessment process.
Costs:
- Cancellation: Roughly R5000
- Transferring: For R1 million bond, roughly R30 000
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"It's not a cheap process."
- Rhys Dyer, CEO – Ooba Home Loans
Renegotiating your interest rate:
Although not guaranteed, there have been cases of successful outcomes for customers, says Dyer.
Often, this occurs when individuals who are facing difficulties meeting their repayment obligations on a 20-year loan opt to extend it to 30 years, consequently reducing their monthly repayments.
However, this adjustment requires thorough documentation, including bank statements, to substantiate one's financial position and strengthen negotiating capabilities.
"It's not always going to happen."
- Rhys Dyer, CEO – Ooba Home Loans
Scroll up to the audio player to listen to the interview.