Switching home loans in South Africa
In South Africa, property owners often face challenges due to fluctuating interest rates, market uncertainties and other socio-economic pressures. It’s understandable that they are constantly seeking ways to maximise the benefits of their home loans as they aim to secure this valuable asset and gain a sense of comfort about their future.
The big switch
Switching a home loan from one bank to another may seem daunting, but it doesn't have to be. The number one reason bondholders choose to switch their loan is to secure a better or personalised interest rate, which often means lower monthly repayments. But there are other reasons for choosing a different home loan provider, such as finding a bank that offers greater flexibility, better credit assessment or a higher standard of service. If the value of your property has increased over time, you may have equity or capital available in the loan and this can allow you to negotiate a better rate with the new bank. Home loans are often not standalone products. When linked to your primary transactional bank, they are often sophisticated and flexible credit facilities. Sometimes these loans are linked to a bank's loyalty or rewards programme and can deliver extra benefits or savings.
Benefits of switching home loans
- Secure a better rate
- Lower monthly repayments
- Unlock potential equity or capital available in the loan.
Step by step
If you’re thinking of switching your home loan, you need to follow these steps:
- Complete an application with the bank you want to switch to, including a property valuation of your property.
- The bank will conduct credit and affordability assessments. Once approved, your home loan switch will be authorised.
- Give notice to your existing bank to cancel your home loan.
- The bank you are switching from will appoint a cancellation attorney to cancel your bond with them at the Deeds Office.
- The bank you are switching to will appoint a bond registration attorney to register your bond with the Deeds Office.
- Please make sure you meet the conditions set by the bank you are switching to for the home loan (including having property insurance, life cover and setting up a debit order to pay your monthly repayments).
What is the cost of switching home loans?
Some fees associated with switching a home loan include:
- Early-termination or cancellation fees: Your bank may charge up to three months' worth of interest as early termination fees. You can overcome this by giving notice to the bank and wait it out before cancelling your home loan.
- Cancellation attorney fees: Your bank will appoint a cancellation attorney to cancel your bond at the Deeds Office. The home loan owner is responsible for paying the bond cancellation fees to the cancellation attorney.
- Bond registration fees: When switching to a new bank, a new bond needs to be registered at the Deeds Office. The bank will appoint a bond registration attorney, and the owner must pay the bond registration fees to the registration attorney.
- Initiation fees: Banks charge initiation fees when a new home loan is initiated. These fees can be a one-time payment or added to the loan amount.
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