Bond Switch To Buy Holiday Home

[Other Pineapple Smurf]

Looking at buying a holiday home 45 minutes away and one of the options is to switch our bond as our property has increased in value significantly. The current outstanding amount is 25% of true market value (recent sales in my street to back this up) and halfway with the bond.

No offers made but we will be doing so next year, or earlier if we see something we like. We first want to get used to paying an extra R10K a month before we do it - no other debt.

Now before y'all preach to me about the tax benefits of the separate bond if we rent out the place, that is our first option but I'm looking at all our options as there is a level of a ballache for getting a bond for investment property. One of the options is a long lease and you can't bond the property but cash rentals are strong.

What are the challenges of refinancing through a switch?

I do understand the costs, which is around R30K which is R13K more than bonding the "cash-out" value as a second bond. I would cancel that loss by only accepting a better interest rate than what I currently have.

 

[zerocool2009]

It all depends when was your bond started.

We have now low rates, projected to increase in Nov 2021

 

[RandomGeek]

Looking at buying a holiday home

Let me guess...a property going for cheap in KZN? Please tell me I'm wrong?!?

 

[Testi Cles]

Looking at buying a holiday home 45 minutes away and one of the options is to switch our bond as our property has increased in value significantly. The current outstanding amount is 25% of true market value (recent sales in my street to back this up) and halfway with the bond.

No offers made but we will be doing so next year, or earlier if we see something we like. We first want to get used to paying an extra R10K a month before we do it - no other debt.

Now before y'all preach to me about the tax benefits of the separate bond if we rent out the place, that is our first option but I'm looking at all our options as there is a level of a ballache for getting a bond for investment property. One of the options is a long lease and you can't bond the property but cash rentals are strong.

What are the challenges of refinancing through a switch?

I do understand the costs, which is around R30K which is R13K more than bonding the "cash-out" value as a second bond. I would cancel that loss by only accepting a better interest rate than what I currently have.

What rate do you currently have?

 

[rietrot]

You could possibly do a futher advance/no futher bond(loan the money you already paid back again) on your current bond. Then there is no need to switch(to different bank) and/or register a second bond. So you safe on the attorneys fees.

If you require another bond then I would just do it separately.

 

[Other Pineapple Smurf]

Let me guess...a property going for cheap in KZN? Please tell me I'm wrong?!?

Mmmmm ..... Could get a nice Toti block of flats ....

 

[saturnz]

I'm generally a fan of property, but holiday properties are extremely risky.

 

[Other Pineapple Smurf]

What rate do you currently have?

Prime + 0.15%

Getting Prime - 0.25% would break even - it R5K for every 0.15% on my outstanding balance for the remainder of my bond (12 years).

I bought my house in the market dip from distressed seller and banks were not generous with bonds in the 2013 second quarter. I got a good rate that quarter as banks were giving mostly prime + 1-2%.

 

[Other Pineapple Smurf]

I'm generally a fan of property, but holiday properties are extremely risky.

Very true and I've been asking friends and family about their experiences.

We enjoy camping a lot, especially in this one seaside town and wondered about what it would cost to rather buy a flat / house. The place can be used by visiting family who also love the area.

As I'm now 100% remote, it could also act as my office and reason for the 45 minute travel time. I'm used to sitting up to 2 hours in traffic.

 

[RedViking]

Very true and I've been asking friends and family about their experiences.

We enjoy camping a lot, especially in this one seaside town and wondered about what it would cost to rather buy a flat / house. The place can be used by visiting family who also love the area.

As I'm now 100% remote, it could also act as my office and reason for the 45 minute travel time. I'm used to sitting up to 2 hours in traffic.

Where is this home? Maybe I can also go there once a term.

 

[Other Pineapple Smurf]

It all depends when was your bond started.

We have now low rates, projected to increase in Nov 2021

2013 and back then I did an affordability matrix on all the interest rate variants. Seeing friends lose their homes in the late 90s when it went 25% made me double-check what I really could afford when it goes bad again.

For 25 years ('80-'05) prime was seldom below 15% and hitting 20% was not uncommon.

 

[Other Pineapple Smurf]

Where is this home? Maybe I can also go there once a term.

Looking at Pringle Bay / Bettys Bay / Kleinmond area.

Leased land in Strand and Franschoek. Some small flats in Strand as well but I hate the Strand.

 

[saturnz]

2013 and back then I did an affordability matrix on all the interest rate variants. Seeing friends lose their homes in the late 90s when it went 25% made me double-check what I really could afford when it goes bad again.

For 25 years ('80-'05) prime was seldom below 15% and hitting 20% was not uncommon.

okay it seems your head is screwed on properly, I can't really add much here

 

[RedViking]

Looking at Pringle Bay / Bettys Bay / Kleinmond area.

Leased land in Strand and Franschoek. Some small flats in Strand as well but I hate the Strand.

Only a 1800km's

Nevermind.

 

[WollieVerstege]

Looking at Pringle Bay / Bettys Bay / Kleinmond area.

Leased land in Strand and Franschoek. Some small flats in Strand as well but I hate the Strand.

We had a place in Rooiels for a while. Was very nice. Started with a small place and slowly built it over 5 years, that way the capital outlay was not so large upfront.
2nd options at the time was Pringle Bay and Bettys Bay. Kleinmond was already getting to busy.

As for the bond application what I had done in the past is to obtain a quote from a rival institution(s) and then took it to my own bank and asked them to match or I move. Once they did not and I moved banks, twice after that the new bank came to the party. They matched the interest rate and registered the second bond at a vastly reduced cost.