Real Estate Investor Magazine South Africa November 2019 | Page 31

A SIMPLE CALCULATION CAN PROVE THE POINT: Paying back a R600 000 home loan over 20 years with an interest rate of 11% will cost R6 193 per month. The total repayment over 20 years (the normal home loan term) will be R1 486 351. A similar home loan amount with an interest rate of 10% will cost the home buyer R5 790 per month. The total repayment will be R1 389 631 over the 20- year period. One extra percent interest will therefore cost R403 more per month and R96 720 over the 20-year repayment term. You can shave off two years and nine months of the home loan and save a further R123 335. One percent lower interest rate, can thus mean a total saving of R220 055. “The cost of cancelling the old home loan of +/- R3 500 plus the new registration costs of R16 500 will be a minor expense compared to the savings calculated above,” says de Waal. risk to the bank may decrease and you will be able to negotiate a lower interest rate. Negotiate a lower interest rate from day one If the home loan application is structured correctly, a lower interest rate can be negotiated from day one. Home loan applications, like in the above calculation, can qualify for FLISP government subsidies – which agents, mortgage originators and financial institutions often don’t consider. A FLISP subsidy can reduce the home loan application. The FLISP subsidy can be deducted from the 100% home loan applied for and a lower home loan amount applied for. A lower home loan amount and a deposit (using the FLISP subsidy as a deposit) would enable the financial institution to approve a home loan “easier” and also grant a lower interest rate. For more information on FLISP subsidies, go to the FLISP information website. To calculate your own FLISP subsidy calculation visit mybondfitness.co.za. Before you go out and re-negotiate your home loan, first make sure that your “financial ducks” are in a row. Do not apply if your budget and credit score are not “fit” enough”, says De Waal. Your current good credit score, your affordability and the value of your property will be the key elements for you to renegotiate a better home loan interest rate. If your credit score deteriorated and/or you took on a lot more credit agreements since you home loan was approved, your ability to renegotiate a better interest rate may not be a ready to for submission. You can start to do your own online credit and affordability score checks to compare if your ability improved over the past few years and the potential new home loan you may qualify for. Visit mybondfitness. co.za for an online credit check and affordability calculation all in one. For further information contact Meyer de Waal [email protected] MEYER DE WAAL, Director of MDW Incorporated, Conveyancer, Public Notary, Attorney, Educator and Property Solution Specialist SA Real Estate Investor Magazine NOVEMBER/DECEMBER 2019 29