Discover How You Can Switch Your Mortgage

In South Africa it has become a feasibly profitable affair for the people to use home loans in the recent years because of the fact that the financial institutions have been struggling over the control of the property market. These gains, they include bridging finance, surety-ship and switching. Here, we will discuss the last of the three.

The phrase above may seem complicated. In simple terms, you are moving your home loan from one financial institution to another. The reason behind this is that you can gain a better interest rate on your loan by moving.

You can save a lot of money by a very small reduction of even 0.5%. This figure could be around tens of thousands or even more. From this it is very clear that it is a very important thing to do. The other benefit for switching is because there is a chance for the new financial institution to give you additional lending based on your property.

After knowing about the things mentioned above, you will definitely make up your mind to go for a switch. But you should keep certain things in mind. Firstly, the financial institution that you have a home loan with at present, might have introduced penalty clauses in your home loan agreement. This means you are supposed to pay additional penalty interests if you plan to cancel the agreement with that institution, that is, if you go for a switch. The penalty interests are usually based on a 90 day or three month interest that you are supposed to pay regularly. This can sometimes prove itself to be a big figure.

Despite the fact that there are many costs attributed to this process, such as bond cancellation costs, registration fees for a new bond, attorney’s fees, valuation fees, and administrative fees for registering new home loans, it is still a gainful choice to make the switch. Several financial institutions in South Africa are providing incentives to their customers, like dropping the valuation and administrative fees altogether. They even are ready to pay for a certain part of the registration process to get an upper hand on their rivals companies. In order to save an additional cost, you need to make sure that your financing company accepts cancellation of home loans after a notice period in regards to the three month penalty interests mentioned above.

If you opt for a switch of your home loan, you will need to provide the new financing company with all the relevant documents, like copies of your pay slips, bank statements, personal identification documents, and everything else that is generally needed for proving affordability.

Some financial companies and banks are offering up to 2% lower interest than the other companies. This 2% savings are really considerable and not an easy task through which we can save lot of money when taking home loan.