Are you getting the cheapest bond?

Valuer and estate agent Mike Spencer of Platinum Global, Bloemfontein, offers tips to Realestateweb visitors on how to pay less for your home loan.

With interest rates so high it is important to look at the bonds on your property and get the best rate possible. The "standard rate" is the amount of interest that you would pay if you got no discount. Discounts are given for the following reasons:

  • Good credit record;
  • High value bond;
  • High deposit, low percentage bond against purchase price/value;
  • Multiple bonds;
  • Use of numerous services at the lending bank; and
  • If you are a high income client.

The interest rate that you will pay is calculated on a matrix, each individual item mentioned above giving a more or less favourable credit rating and thus larger or smaller discounts on the standard rate. Good clients get a better rate than marginal ones.

Can you get a better rate on your current loan?

Firstly, you need to ask. Few people ever ask for a better rate and simply accept the one that they are given by the bank. If you ask you could be surprised by receiving an extra 0,25% or 0,5% discount.

Talk to your bank about consolidating your loans. If you have numerous small loans it costs the banks money to administer each loan separately. Sometimes you even end up paying a monthly fee on each of your bonds. Consolidating the bonds into one account can result in less fees, a lower interest rate and smaller bank charges.

You may have loans with different banks. Consolidating your loans with one bank will reduce costs and interest rates.

There is a government penalty tax on bonds over 80% up to 1.5%. Move funds around to reduce the very high percentage bond down to below this percentage.

Banks will reward you for having more services at one bank. It would therefore make sense to have your cheque account and bank card accounts, for example, at the bank where you have your bond.

Shop around. Be open with different banks about the financial services that you use. Ask them what they would offer in way of a bond if you brought all your business to them.

Consider consolidating products such as Absa One. They approve an overall level of credit available to you. They would take all your assets as security in return. Usually they do not register a bond against your properties and this is a considerable saving in costs. You are then given a cheque book, credit card and petrol card linked to this account and each night your spendings are paid from this account. Thus you live off a single account with a very favourable interest rate. From this single account you buy your property, cars and live up to your credit limit. Everything you buy is cash and you ask for cash discounts! Each month you pay an agreed minimum. Interest is at the bond rate less your discount!

Article from: