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Cape Town – Your home loan is like a mini savings account where you get the opportunity to save risk free, tax free and at your mortgage loan rate, an FNB home loan expert said.
“It’s a very flexible financial tool,” said Tommy Nel, head of credit at FNB Home Loans.
“The home loan account is really the thing that makes it all happen,” he said. “A mortgage loan basically just makes the entire thing possible right now."
He said if you get a salary increase, you could increase your home loan contribution because this would speed up the process and ensure you endure less interest rate costs over time.
“You can pay more than what’s required of you,” he said. “You can [also] transfer money between your home loan and cheque account.”
Watch the full interview:
Bonds not about cheapest repayment
Getting a bond is not about finding the cheapest repayment, said Nel. “It ultimately comes down to comparing interest rate levels,” he said. “Extending the term could place a significant financial burden on you. Try pay that loan off as quickly as you can.”
Watch the full interview:
Test yourself
A tip for would-be home loan consumers would be to test yourself and see if you can save the amount you would spend for a few months before applying for a loan.
Nel said FNB advocates that customers should save up for their deposit and put some of it towards their home loan. “Some people find that prohibitive, but if you’ve already owned a property previously, a good discipline would be to put that money towards the acquisition of your new property,” he said.
He said credit standards are much tougher currently than it was leading up to the 2008/9 credit crisis, so 100% finance is just not as available as it was previously. “As you move up in the income ranges, banks actually expect customers to put some of their own money into the transactions as well,” he said. “That could be somewhat of an obstacle.”
“The market is actually quite strong at this point,” he said.
While consumers were under pressure, people in the property market were in good financial health, said Nel. “With interest rates having only increased by 75 basis points, our customers are actually still in good shape,” he said. “The property market is healthy.”
Watch the full interview:
- Fin24.
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