IT IS natural that people are worried about buying houses when the economy is the subject of so much bad news.
Stanley Mabulu, head of channel management for a home loans division, said the major worry facing homebuyers is the possible rise in interest rates.
He said it is important for homebuyers to be aware that a rise in the interest rate means they will need to pay more to service their home loans.
“It is easy to get excited about a house but before you commit, make sure that your income has enough slack to absorb extra costs that may happen.
“A home loan of R500 000 paid back over 20 years at a 13% – prime plus 3% – interest rate, means you will need to pay at least R5 900 a month for 20 years.
“The same home loan at 11% is a minimum of R5 200 a month.
Although a higher interest rate may not immediately affect your repayments, it does add up to a lot of money over the long term.
How to get a better interest rate
- Credit score: Banks look at your credit and financial history when assessing your credit score.
Good credit may result in a better interest rate. Poor credit leads to a higher interest rate or even your home loan being declined.
- Negotiate: People often accept the first interest rate offered. Ask for a better rate.
- Higher deposit: Paying a higher deposit reduces the bank’s risk when it grants a home loan. A smaller loan is also less risky and easier to secure.
