Home Loans

Deciding on a financier for your home loan can be a difficult task with all the options available to you. To make it easier we’ve compiled this list of things to ask when applying for your home loan so you can make an informed decision.

1. Interest rate
Find out the annual percentage rate (APR) of the loan’s interest. Additional fees involved in procuring the loan often means that the APR is higher than you were originally quoted. The APR in adverts are often used as bait to get you interested in a specific deal, so always ask about extra fees and rates.

Also ask whether the interest rate is fixed or not. These fluctuate, which means that you may end up paying more for interest than when you applied for the loan. Ask how much it will cost to “lock in” the interest rate. Locking in an interest rate means keeping it fixed at the same rate as the day you applied. This does cost you.

2. Prepayment penalties
As financiers earn their money off of your interest, they make more money the longer it takes you to pay off your loan. This means the prepayments (or making additional lump sum payments) to your loan, reduces the overall outstanding amount you owe with which is calculated the interest. To prevent people from making such payments, financiers add prepayment penalties to the contract. This means you pay a fee for paying more on your loan. Find it if this is the case and how much these fees are.

3. Documentation
Ask your financier what documentation you will need to apply for the loan. Depending on the type of loan and the financier, this documentation varies. Building loans, for example, require plans to accompany the application. If you’re applying through a company then you’ll need additional bank statements.

4. Length of time
Some applications take as long as 60 days to process. Ask for a detailed timeline so you know when to put in an offer to purchase and when to lock in your interest rate.

5. Rewards
As the home loan market is competitive in South Africa, many lenders offer reward schemes or loyalty programmes, such as linking your home loan to a voyager or e-Bucks account. Find out what these rewards are from each lender before deciding on who to go through.