Well, my whole idea when starting this BLOG was to write about the different homeloan companies, banks and property agencies. Talk about those who are bullshitting, those who are cheating people out of money but at the same time giving those credit when credit was due. SA Homeloans, you're going to be the first of the home loan companies. The reason I've chosen you is:
1. You're always in the public eye
2. You're one of the few "controversial" companies in South Africa
3. There's loads of questions and queries I have...
I hope that someone at SA Home Loans reads this and helps shed some light on questions that not only I have but that many people have asked me to post up on this BLOG this evening. As a matter of fact, they're all sitting here behind me ;-)
SA Homeloans JIBAR rateSA Homeloans have a great reputation for having some of the lowest interest rates out
there... That's a given and it's a known fact amongst mortgage originators. What most people don't know is how they can offer such low rates.
SA Homeloans differ from your normal mortgage origination companies. Instead of relying on the interest rates that the bank offer most originators, SA Homeloans's funding comes from something called the JIBAR rate. The JIBAR rate is the 3 month interbank agreed rate. This is the average interest rate at which banks buy and sell money. The average is calculated by SAFEX on the securities exchange as the average rate quoted by the various major banks in South Africa. This rate normally sits at around 9.1%. What this means, is that SA Homeloans are able to buy money at a rate of 9.1% thereby allowing them to offer people loans and mortgages at rates allot lower than those of the banks. In actual fact they should (and I stand to be corrected) be able to offer rates at 2% lower than the banks can offer you.
SA Homeloans - FACTS!1. They only offer home loans. They do not offer further loans or further advances on your additional home loan.
2. Loan amount (Loan To Value Ratio) may not exceed 95% of your property value.
3. They have loyalty incentives where they offer you a 0.6% drop in your bond after being with them for 2 years (Kind of shows you how much money they're making)
4. They offer a 50% discount on legal fees
WHAT YOU DIDN'T KNOW ABOUT SA HOMELOANS
Well firstly because Homeloans SA rely on something called the JIBAR rate, they are at the hands of the securities exchange. This rate changes every 3 months. So let's say for the first 3 months you're offered a rate of 10% (not fixed). 3 months later they purchase more money but the JIBAR rate has jumped up by 0.3%. Automatically and you won't even know this until you get you bond statements, you're monthly repayments jump up by 0.3%. For those people, who are a but short of cash, and probably thought this sounded like a brilliant idea and an awesome rate, if you're living on the edge every month and you can barely make you're bond repayments, 0.3% increase in your repayments for the next 3 months WILL HURT YOU! Should this rate go up again in 3 months time, you're looking at a 0.6% increase. It's their way of making money and it's something that they don't explain to clients when they sign up... It's basically the "read between the lines" portion of their TV Ads. Don't get me wrong, things swing both ways, but this will catch you at some point or another...
SA HOMELOANS INTEREST ONLY PAYMENT OPTION
This ladies an gentleman is the biggest NO NO in the history of mortage origination. By offering people the option of only paying the interest portion of your bond, they are automatically putting you into more debt. IF you EVER have any extra money at the end of the month, the bond is the account you want to put that money into... They even give you an example; According to SA Homeloans on a R500 000 bond at an interest rate of 10% your monthly repayments will increase by R360 every month. This is ontop of your monthly repayments that you owe. Work that out over 20 years. Plus, just imagine the JIBAR rate increases by 0.6% over the next year, that's going to hurt you...
Don't get me wrong people, this company is great and they do offer awesome rates. They also have a winning formula which is what makes them one of the most successful mortgage origination companies in South Africa, but I believe people need to weigh up their options and just be careful before falling for the "WE CAN GIVE YOU 2.5% BELOW PRIME GUARANTEED".
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