Longer South African home loan repayments now popular
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In order to soften the blow of higher interest rates and in a market where future interest rate trends are difficult to predict, many home purchasers are applying for the longest possible repayment periods on their home loans.
"Even though most applicants intend on paying the instalments which would apply to a 20-year repayment term, many apply for a 30-year repayment period as a strategic buffer mechanism to ensure their bond repayments remain affordable should interest rates increase," reports Amdec Property Development's head of bond origination Ronell Killian.
By doing this, she notes, it provides a degree of flexibility when it comes to a home loan repayment.
"Qualifying for a longer repayment period does not increase the amount of interest paid, as this is charged on the outstanding balance of the loan each month, unlike vehicle finance where the full interest amount is paid first and the balance of the loan only reduces once all the interest is paid," she points out.
Also, with the introduction of the National Credit Act (NCA), Killian says that applicants will often qualify for a slightly higher home loan when applying for a longer repayment period.
Published By: I-Net Bridge