Home Buyers Info - Types of Home Loans in South Africa

When applying for a home mortgage loan, the top banks will usually offer the following types of loan.

First Time Homeowners Loan
The First Time Homeowners Loan is the ideal way to get into the property market. It allows new buyers to borrow more than 100% of the property value, which allows registration and transfer costs to be included in the total purchase price. This type of home loan is increasing in popularity, also due to the fact that there is no deposit required.

Variable Rate Home Loan
A Variable Rate Home Loan has an interest rate linked to the base home loan rate. With this type of loan, your interest rate will fluctuate, depending entirely on current market conditions.

Capped Rate Home Loan
The Capped Rate Loan is like the Variable Rate Loan, except that there is a maximum interest rate defined. This means that you can benefit if home loan interest rates decrease, but you will never pay more than the capped rate. This type of home loan is generally more difficult to obtain due to the more stringent qualifying criteria, and is not always available from every bank.

Fixed Rate Home Loan
With a Fixed Rate Loan, your interest rate is set for a period of usually between one and two years. This allows you to know exactly what your interest payments will be, and offers protection from rising interest rates. However, the fixed rate will generally be somewhat higher than the base rate when you first take out your home loan, and you will not benefit if the base rate decreases over the fixed period.

Reducing or Step Down Loan
Regardless of whether the base interest rate increases or decreases, a Step Down Loan guarantees that your interest rate will decrease over a set period, which is usually less than 5 years. For instance, your interest rate may be set to decrease by 0.25% every 6 months for the duration of the set period.

At Bonus Bonds, we will guide you through the application process, and help you choose the type of home loan that is best for you.