What is Re-mortgaging?

Re-mortgaging or ‘switching’ is the practice of transferring banks by canceling your existing bond and taking out a new one with another bank.

In the last few years the South African banking industry has ‘opened up’ to aggressive new entrants, some of who are embarking upon marketing campaigns to get potential clients to switch to them. This has meant that the traditional banks are becoming more competitive on their rates in order to hold onto their market share. Consequently the switching market is beginning to grow.

"Most people re-mortgage due to their own financial situation improving and the realisation that they deserve a better deal. Couples may have acquired a 100% loan at the full prime rate without any fringe benefits. Invariably the existing Lenders will not consider any changes in their loan conditions or interest rates, however had they bought the house in the current market and in their current financial circumstances their bank would have given them a better rate. Therefore why shouldn’t homeowners shop around if the traditional banks do not automatically change their original deal? (which happens the vast majority of the time).

In the UK the number of homeowners re-mortgaging their properties has risen substantially. It has shot up over the last five years and the demand for substitute bonds is likely to continue. Charcol, a leading British mortgage broker, believes that up to 50% of borrowers- nearly eight million in number- are wasting billions of pounds in excessive repayments." Quote from Homeloan magazine

By our estimates the situation in SA is the same, homeowners are wasting billions of Rand on their bond repayments.

Switching is becoming viable and popular in South Africa due to the following reasons;

• The combination of falling interest rates and rising property prices, means better interest rates are being offered by banks, and property owners are building larger equities in their houses.
• The recent increase in competitiveness between banks due to the opening up of the financial services industry has led to attractive mortgage packages being offered.
• Bank customers are becoming more aware of better rates in the market place.
• Borrowers can save thousands by using SA Bonds broking services and get the best deal available.

 

Why Re-mortgage?

• Cheaper interest repayments, or withdraw extra finance on the back of the increased equity youhave in your house.
• Consolidating outstanding debts on credit cards or bank accounts into one monthly repayment, taking advantage of the lowest rate possible available to them due to the economies of scale with the bond.
• Raising capital for expenditure on the property, such as extensions to the existing property, new bathrooms or kitchens etc. When clients re-mortgage in order to do this they can find that the overall price of the house increases due to the house improvements.
• Purchase of a new car
• When raising capital for new businesses, individuals can be charged crippling interest rates, however by raising the finance through their home loan individuals can borrow money at a far cheaper rate.

What will be the savings from Re-mortgaging?

Re-mortgage example

Using the example of an individual with a R500,000 mortgage on his property, which he purchased 5 years ago for R600,000.

Over the past five years the individual’s salary has increased by 30% and the value of his property has risen from R600,000 to over R1,000,000 (using the average statistics for South Africa from ABSA of 12%pa)

Therefore the homeowner in question has a far better risk profile than they did when they first took out their Mortgage. Less risk = Lower interest rate.

If the homeowner re-mortgaged for the original amount from a rate of Prime less 1.5% to a rate of Prime less 2% then his monthly repayments would fall from R4,825 to R4,660 a saving of R164. If this amount is compounded over the life of the 20 year mortgage the homeowner can make a saving of R124,880! This is nearly a quarter of the original value of mortgage.

Also, not only is the individual eligible for a cheaper home loan, due to the increase in the value of his house and the increase in his salary he can now apply for a larger mortgage. He can increase his mortgage by over R17,000 and still only be paying the same monthly instalments as he was with his previous mortgage!

Please use the mortgage calculator provided to see the size of the mortgage you are eligible for and the monthly interest repayments on the mortgage. Then simply apply on line using out online application form, alternatively you could contact our mortgage experts.

What will be the costs incurred for switching bonds?

Homeowners are not tied into your mortgage, most mortgages have a cancellation period of only one month. There will unfortunately be a price to be paid in switching bonds, but over the years the savings to the homeowner will be substantial, therefore this will almost always be a cost worth paying.

Most of the charges are for the registration of the new bond. If a homeowner intends to increase their bond then these costs will be incurred to some extent anyway. Bond registration costs, including a banks assessment and initiation fees, usually run between R2, 000 and R6, 000 depending on the amount of the bond.

All these costs can be included in the value of the new bond so that there will be no up front payment needed.

Please use our Re-Mortgage Cost Calculator to find out how much your re-mortgage will cost.

The re-mortgage processProcess

There are three ways in which you can proceed;

1> Fill in the application form, this will usually take you 20minutes and once it is completed we can begin the re-mortgage process. By submitting your application form you are under no obligation to go through with your re-mortgage, but it enables us to begin canvassing the lenders.

2> Fill in our quick enquiry form, this will take you 20 second to complete, and one of our consultants will phone you at your convenience.

3> Phone us on +27 21 462 2112 and discuss your application immediately with one of our consultants.

Once your application has been submitted an immediate email reply will be sent to notify you that we have received your application and a SA Bonds consultant will contact you within 24 hours to discuss your application.

Once your application has been submitted, please can you check your documentation to ensure you know the notice period of your existing mortgage (This is normally a period of one month, but can vary).

We also ask you to fax:

• a copy of your I.D,
• a copy of your salary slip (If you are self employed you must also fax us three months bank statements as proof of income) and,
• three months of statements from your present bond if you are re-mortgaging, or your 'offer to purchase' if you require a new bond.

Fax us on 0866887795

We will find you the best mortgages available and will contact you again to discuss what mortgages the banks are able to offer you.