21 August 2017: If you ever find yourself pondering the prospect of switching your home loan to another bank, it is essential that you do your homework.
Stanley Mabulu, Head of Sales at FNB Home Loans says lenders have made it easier for consumers to switch home loans, provided that they meet all the criteria and requirements.
“There are many reasons why consumers consider switching, such as getting better service and value, favourable interest rates, consolidating finances when getting married and long term cost saving, amongst other reasons,” says Mabulu.
However, before embarking on this financial journey, there are important factors that consumers should consider to ensure that they reach their goals and get the best value possible from their bank:
- New home loan – when switching, you are technically applying for a new home loan with the lender of your choice.
As a result, a full loan application has to be completed, followed by a standard affordability and credit assessment which is line with the National Credit Act (NCA) requirements.
“If your finances are not in order, there is a high likelihood that your application may not be successful,” says Mabulu.
- Costs – fees that you would normally incur for a new home loan, such as the initiation and bond registration fees are also applicable when switching.
“Because you are taking up a new home loan, the bond you had registered when first buying your house should be cancelled at the Deeds Office, and there will be additional fees associated with this,” says Mabulu.
Furthermore, you are also likely to be charged an early termination fee by your current home loan provider, should you fail to inform them 90 days in advance that you are cancelling your bond with them.
In order to take the angst out of switching, lenders often give customers discounts or take on some of these fees to make the process easier. For example, FNB pays bond registration attorney’s fees up to the current bond amount and debits the initiation fee to the bond account, so that customers won’t have to pay it upfront.
- Switching to your primary bank – it is advisable to bank with the provider that has bonded your home, as this could give you more value and provides flexibility in managing your finances.
“Consumers who have more than one home loan with different lenders also find it valuable to switch, as having their property portfolio with one bank makes it easier, cost effective and provides them with more value in the long-term,” adds Mabulu.
- Shopping around for the best deal – it is standard practice for lenders to entice customers with irresistible offers to switch. However, when planning to switch make sure that you have consulted all major lenders and weighed the value and benefits offered before making your decision.
“Switching your home loan can benefit you in the long-term if carefully considered and carried out in line with your personal financial plan,” concludes Mabulu.