What are Home Loans?
A home loan is an amount an individual borrows from a financial institution such as a housing finance company to buy a new or resale home, construct a home, or renovate or extend an existing one.
Best Bank For Home Loans In South Africa
Variable Interest Mortgage Bond
The variable-interest mortgage bond is probably the most common type of home loan. In this model, the interest rate is not fixed. As the name suggests, lenders offer a variable interest rate over the lifetime of the mortgage.
A variable interest rate (sometimes referred to as a “floating” or “adjustable” rate) changes over time depending on a given benchmark or market conditions. When you choose this type of home loan, you can expect your interest rate to go up or down accordingly.
Fixed-Rate Home Loan
Think of a fixed-rate home loan as the complete opposite of the variable interest type. As the term “fixed” implies, the interest rate on this loan remains fixed throughout the lifetime of the loan.
While this type of home loan may have a higher interest rate in the beginning, its main advantage is that it can protect you from changes in the market. This solution is preferable if you want to work out in advance what your repayments will be.
Capped Rate Home Loan
The capped-rate home loan has features of both fixed and variable home loans. It is variable in that the interest rate can go up or down depending on a specific benchmark or market conditions. However, it is fixed because the fluctuation is restricted to a certain threshold.
The main advantage of this type of home loan is that it gives you the benefit of paying a lower interest rate when the rates go down. It protects you from paying too much interest if the rate rises above the cap. However, the cap in the interest rate means that you may not fully enjoy the benefits offered by extremely downward fluctuations.
Which bank is best for a mortgage in South Africa?
Nedbank has one of the best mortgage offers in South Africa, with customers benefiting even before they pay their first installment. Clients can receive up to R15,000.00 in cash back on the loan value. The cashback is, however, limited to one percent of the loan amount.
Which bank has the best interest rate in South Africa?
Best 48 Months Fixed Deposit Rates 2023
| Ranking | Bank | Nominal Interest Rate % |
|---|---|---|
| 1 | Capitec Bank | 9.50% |
| 2 | FNB | 9.00% |
| 3 | Standard Bank | 8.61% |
How to get a home loan in South Africa?
How to qualify for a home loan in South Africa
- Ensure your credit score is above 610+.
- Get prequalified so you have an idea of what you can afford before applying for a home loan.
- A home loan comparison service will submit your application to multiple banks, improving your chances of obtaining home loan approval.