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Capitec are entering the home loan market with loans up to 30 years. Is that actually a good thing?
You buy a house for R1m at 7% interest. How much do you pay?
Over 20 years: R1.86m
Over 30 years: R2.40m
The difference?
You pay R534k more by choosing the 30 year option
You buy a house for R1m at 7% interest. How much do you pay?
Over 20 years: R1.86m
Over 30 years: R2.40m
The difference?
You pay R534k more by choosing the 30 year option
The 30 year option should make monthly payments more affordable right?
Yes, but by how much exactly?
Taking a 20 year loan will have you paying R7,753 each month
Taking a 30 year loan will have you paying R6,653 each month
You pay R1,100 less each month.
Yes, but by how much exactly?
Taking a 20 year loan will have you paying R7,753 each month
Taking a 30 year loan will have you paying R6,653 each month
You pay R1,100 less each month.
So how do you hack a home loan?
There's 3 main levers you can pull.
1. PRICE
2. FINANCE COST
3. LENGTH OF LOAN ++ MONTHLY REPAYMENTS
4. SIZE OF LOAN
All these elements are within your control.
There's 3 main levers you can pull.
1. PRICE
2. FINANCE COST
3. LENGTH OF LOAN ++ MONTHLY REPAYMENTS
4. SIZE OF LOAN
All these elements are within your control.
1. PRICE
This impacts everything. If you are able to negotiate a house down from R1m to R900k, you will end up paying R1.67m
If you buy it for R1m, you end up paying R1.86m
That's R190k hanging around before your first monthly payment.
It pays to negotiate
This impacts everything. If you are able to negotiate a house down from R1m to R900k, you will end up paying R1.67m
If you buy it for R1m, you end up paying R1.86m
That's R190k hanging around before your first monthly payment.
It pays to negotiate
2. FINANCE COST
Don't ever take the first home loan rate you're offered. Shop around. The decrease in your credit score from multiple applications is usually very, very marginal.
People who work in banks get home loans at Prime less 2%.
That's a R280k saving on a R1m house.
Don't ever take the first home loan rate you're offered. Shop around. The decrease in your credit score from multiple applications is usually very, very marginal.
People who work in banks get home loans at Prime less 2%.
That's a R280k saving on a R1m house.
3. LENGTH OF LOAN
Reducing the period of your loan will reduce how much you pay. Sure, monthly payments are a bit higher but small extra payments make a HUGE difference.
Paying an extra R200 on a R1m house will save you close to R65k & reduce your loan by 1.3 years!!
Reducing the period of your loan will reduce how much you pay. Sure, monthly payments are a bit higher but small extra payments make a HUGE difference.
Paying an extra R200 on a R1m house will save you close to R65k & reduce your loan by 1.3 years!!
4. SIZE OF LOAN
Not paying a deposit hurts you badly in the long run
A R1m loan over 20 years with no deposit? R1.86m
A R1m loan over 20 years with a R100k deposit? R1.67m
More importantly, the deposit lowers your monthly repayments (R775 lower each month)
Not paying a deposit hurts you badly in the long run
A R1m loan over 20 years with no deposit? R1.86m
A R1m loan over 20 years with a R100k deposit? R1.67m
More importantly, the deposit lowers your monthly repayments (R775 lower each month)
In short, to hack your home loan
- Negotiate hard to get a great starting price
- Push for a lower interest rate
- Fixed rates are higher than variable rates, be careful
- Pay a little extra into your bond each month
- If you can, avoid taking out loans up to 30 years
- Negotiate hard to get a great starting price
- Push for a lower interest rate
- Fixed rates are higher than variable rates, be careful
- Pay a little extra into your bond each month
- If you can, avoid taking out loans up to 30 years
