How to get the lowest interest rate on your home loan
Category Buying a house
Who would have thought, given all that has occurred after the last 2 years, that one of the benefits of the economic climate has led to exceedingly favourable conditions for those seeking to take out a home loan?
With interest rates being as low as they are, savvy investors are quickly maximising their investment opportunities as a surprisingly effective avenue to reducing their overall expenses. This is because lenders and financial providers have recently been able to offer prime less than a single percentage point in many cases.
That being said, how can one take advantage and maximise their own returns?
Interest rates and home loans in a nutshell
Generally speaking, interest rates are calculated based on a number of factors. Each individual applicant for a home loan will receive an interest rate based on their current financial portfolio. However, interest rates can also be calculated based on external factors as it is often simply calculated based on what the banks are willing to offe
Low-risk applicants are usually offered "sub-prime" rates which are usually referred to as preferential interest rates. But beyond this, homeowners need to decide between a fixed interest rate or a variable rate fully dependent on their home loan. Variable rates fluctuate and are linked to prime, whereas a fixed rate does not change regardless of market influences.
As stated above, a homeowner's interest rate is calculated based on their profile and their ability to prove financial stability to the bank. Part of attaining a better rate is achieved by getting prequalified before applying for your home loan.
Manage your credit before applying
You can attain prequalification in a number of ways. The most convenient course of action is to download or utilise a fee bond indicator tool such as BetterBonds to attain a prequalification certificate. Real estate experts recommend that even the act of calculating your credit and attaining a certificate helps to 'prime" your financial profile before accredited lenders assess your profile.
It essentially acts as a preliminary process and allows you to get ready for and understand what will be expected when applying for a home loan in earnest. Beyond assessing your credit score and calculating affordability, the prequalification will also highlight some of the pitfalls in your financial portfolio, allowing you the opportunity to work on and improve these areas before applying for a home loan.
A few tips on scoring a better interest rate
Property Tree understands just how important it is for homeowners to attain the best possible rates in a payment scheme that can average over 20 years of their life. That being said, here are a few pointers to fixing your profile before applying for a home loan.
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Boosting your credit score - The first thing you want to do is calculate your credit score. This can be done by quickly downloading an app like ClearScore which will quickly access your portfolio and give you a score out of 720. Any score rating above 670 is considered "excellent." Use this tool as an indicator for where you need to pay back bills and settle accounts, monitoring it on a monthly basis to see if it improves.
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Putting down a deposit - The proportional size of your deposit will also affect your interest rate. Usually, anywhere between 10 - 15% of a downpayment is usually enough to affect monthly bond payments as well as ensure you stand out as a serious homeowner.
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Compare home loans and view your options - perhaps the most effective way to achieve a reasonable interest rate on your home loan is to use a comparison service to see your options. Don't make the mistake of thinking that the first interest rate you're offered is the only one you'll get. Online services such as Ooba will collect all the necessary information and send multi applications to various banks. This gives you the benefit of being able to pick and choose the home loan interest rate that best serves you.
Whether you're looking for your dream property or lifestyle estate, contact us at Property Tree and let our professional group of Property Practitioners find the right home for you!
https://www.property-tree.co.za/ or contact us: https://www.property-tree.co.za/contact/
Author: Bryce Anderson