This is how you can secure the best interest rates on your home loan

South African consumers are currently trying to deal with increases in prices of commodities. With price increases in fuel, transport and basic goods and services, the need to find ways of saving and paying less has never been greater. For those in the property market, securing the best interest rates on your home loan is one sure way of maintaining financial security. Here is how you can secure the best interest rates on your mortgage.

Lower your debt to income ratio

Even with a high credit score, it’s possible to accumulate a lot of debt. Lenders don’t want you using more than roughly 40 percent of your monthly income on your mortgage, car payments, and credit card bills. The lower your debt-to-income ratio, the lower your interest rate will be.

Fixed or adjustable rate mortgage

For those who plan to pay off their mortgage in a short amount of time, adjustable rate mortgage (ARM) is a better option. For the introductory period of an ARM loan, the interest rate will be lower than that of a fixed rate mortgage.

Higher deposit

Paying a higher deposit reduces the risk that the bank is exposed to granting you the mortgage. As a result, this positively impacts your credit profile enabling you to secure a more attractive interest rate.

One person for the loan

Sometimes having two people making a joint application will cause an increase on your interest rate and actually keep you from getting the loan all together. This is because banks typically take the average of your three credit scores, if one person has a higher average credit score, while the other has a lower average credit score, you don’t want to have the person with a lower credit score as a joint applicant. That doesn’t mean that both can’t be on the title, but it may make sense to have only one on the loan to help decrease the interest rate.

Increase credit score

Whether you own a home already or you are looking to purchase a home for the first time, taking the time to increase your credit score will save you thousands over the life of your mortgage and decrease your mortgage interest rate. You can achieve this by making sure that all of your accounts have at least 6 months of perfect payments, and reviewing all of your accounts and taking action on delinquent accounts.

Employment and income stability

Being consistently employed with steady income for at least two years will go a long way in being rewarded with lower interest rates. When processing your application, banks consider that stability to be an indicator that you will keep up with repayments.

The tips provided above should assist you in securing better interest rates on your property.





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