Types Of Home Loans Available

A home loan is an amount of money that you borrow from a financial institution for the purpose of buying a property. The money along with interest accumulated is then repaid to the lender over a contracted period of time. There are a few types of home loans available in South Africa today and each one has something more that makes it unique from all the rest.

Types Of Home Loans Available In SA

  • introductory or ‘honeymoon’ rate
  • variable rate
  • fixed rate
  • split loans (a mix of fixed and variable rates)
  • interest-only

Introductory Rate

A home loan with an introductory rate means that you will pay a lower rate of interest for the first few years before the repayments revert back to the original interest rate. Thus gives you hire tune ti get on your feet and maybe buy some furniture for your home before settling down into paying off the home loan.

Variable Rate

As what the name suggests, a variable rate is one which fluctuates according to the official cash rate set down by the Reserve Bank of South Africa. During the contracted term of your home loan, a variable rate can go up as will as down at any given time which alters your set repayments. Variable loans include basic, standard or revolving line of credit products and are traditionally the most flexible.

Fixed Rate

Home loans with a fixed rate allow the borrower to lock in an interest rate of a particular period of time normally one to five years. The borrower choose a fixed rate who are assured their repayments will be set for the fixed period and that if the interest rates rise, the rate will remain the same. Although if the interest rates drop the fixed loan will keep the borrower at the higher rate.

Split Loan

A split loan is a pre determined portion at a fixed interest rate and the rest at a variable rate of interest. This is to give you the assurance of a fixed rate but still take advantage of rate drops. Fixing a portion of a loan gives flexibility trade off. The fixed rate portion of a loan generally has more restrictions than a standard variable.

Interest Only Home Loan

This type of loan means that no principal repayments are required. The borrower will only have to pay the interest portion. The borrower can not have more of their loan outstanding then the originally borrowed so interest repayments are required the loan balance below the amount. Theoretically, the loan need never be paid out as long as interest payments are made. Some loans can be split with an interest-only portion to reduce the repayments necessary in the early years of a loan.

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Types Of Home Loans Available
Article Name
Types Of Home Loans Available
Description
The money along with interest accumulated is then repaid to the lender over a contracted period of time. There are a few types of home loans available in South Africa today and each one has something more that makes it unique from all the rest.
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Likemoney.co.za


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