Simply put, it’s a loan given to you by a home loans provider where the home or property you’re buying is used as a form of security, just in case you can’t make the loan repayments.
From the moment you get a bond and it’s registered, the home loan provider will keep your property’s title deed until your home loan is paid in full. The home loan provider is legally entitled to keep this title deed, until you’ve paid of the loan. As easy as that.
There are however some steps to take before you can apply for a home loan. Read about The Beginners Guide to a Home Loan.
The two main factors in a loan repayment are, how much you borrow and the repayment term. Mostly, you’re required to pay back a home loan plus interest over a set period of 20-30 years.
The interest on your bond is based on the current interest rate (determined by the South African Reserve Bank). Your monthly payment will change in accordance with how the interest rate increases or even decreases. For the first few years, you can expect to pay off the interest first, over time more of your payments will go towards actually paying of the actual loan amount.
First, you need to earn a regular monthly income. A big factor your home loan provider will use is you loan affordability. This determined by what you earn compared to what your monthly loan repayment could be.
In most cases you won’t be considered for a home loan if the loan amount is 30% your salary or joined salary.
Plus, there are other fees to consider as well, read about them in The Beginners guide to a Home Loan.
A small, extra payment into your home loan account every month can make a huge difference. The interest on you bond is calculated daily, so the amount to owe the bank can in fact increase every day. So paying extra into your home loan account from the start, will help decrease the final cost of your home loan and thus, decease the payment period.
Well, this is where they take your home. It starts a process called foreclosure, where they’ll attempt to get the balance back that you own them by auctioning your home. Once the house is sold, the money is used to pay what you owe, minus legal costs. Any outstanding amounts after that, you’ll be responsible for paying.
There you have it, everything you need to know about a simple home loan. Now all you need is to find the best home lone provider. Take a look at our Online Home Lone Comparison to see who is rated the best home loan provider in South Africa.