buying a house advice

M

Mvu

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Hi everyone

Is it advisable to take a variable interest rate when buying a house? Especially with the current political conditions of SA.
 
I still think so. When you take fixed, they usually fix it at a higher rate than the variable rate.
 
Pakka said:
I still think so. When you take fixed, they usually fix it at a higher rate than the variable rate.
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Yeah, I guess it for the sake of knowing that I will pay a fixed amount through the duration...
 
Mvu said:
Yeah, I guess it for the sake of knowing that I will pay a fixed amount through the duration...
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The problem with that, is if, the lending rate goes much lower, you will lose out considerably. Because the extra money you would pay into the bond wouldn't be seen as capital being paid off, but still go to interest.
 
Mvu said:
Yeah, I guess it for the sake of knowing that I will pay a fixed amount through the duration...
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It wouldn't be for the duration anyway. Most banks only let you fix the rate for a few years and not for the whole 20 of a homeloan.
 
Get a quote on both variable interest rate and fixed rate. Fixed rate will be higher.

Accept the variable interest rate but pay the monthly installment of the fixed rate.
That way you start saving up on interest charged, and by the time the interest rate catches up with the fixed rate - you might have saved a bit on interest.

Also, just be careful, The fixed rate contracts that I have seen will fix the rate for a period (Say 3-5 years) and it becomes variable after that...
 
I have to ask, is the house for you or one of the side chicks?
 
Mzala said:
Get a quote on both variable interest rate and fixed rate. Fixed rate will be higher.

Accept the variable interest rate but pay the monthly installment of the fixed rate.
That way you start saving up on interest charged, and by the time the interest rate catches up with the fixed rate - you might have saved a bit on interest.

Also, just be careful, The fixed rate contracts that I have seen will fix the rate for a period (Say 3-5 years) and it becomes variable after that...
Click to expand...
So I was told. They told me that it would be fixed for 2 years then variable unless I told them to fix it again. So it would seem variable is the way to go.
 
Mzala said:
Get a quote on both variable interest rate and fixed rate. Fixed rate will be higher.

Accept the variable interest rate but pay the monthly installment of the fixed rate.
That way you start saving up on interest charged, and by the time the interest rate catches up with the fixed rate - you might have saved a bit on interest.

Also, just be careful, The fixed rate contracts that I have seen will fix the rate for a period (Say 3-5 years) and it becomes variable after that...
Click to expand...
And thank you for your advice
 
Jehosefat said:
It wouldn't be for the duration anyway. Most banks only let you fix the rate for a few years and not for the whole 20 of a homeloan.
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They told me that it would be fixed for 2 years then variable unless I told them to fix it again. Thanks for pointing out that to me
 
I'd advice and say get a fixed rate, most definitely. Interest rates can go up as high as over 20% like it did in the 80s, or as high as over 15% during Tito Mboweni's tenure. You can easily budget with a fixed rate. I personally have a variable interest rate because I thought a fixed rate only applies to motor vehicle financing.
 
Sly21C said:
I'd advice and say get a fixed rate, most definitely. Interest rates can go up as high as over 20% like it did in the 80s, or as high as over 15% during Tito Mboweni's tenure. You can easily budget with a fixed rate. I personally have a variable interest rate because I thought a fixed rate only applies to motor vehicle financing.
Click to expand...

The problem with this approach is that they only let you fix it for 2 years at 2% above the current variable rate (give or take) so there is almost no way that the variable rate will go above the fixed rate in the time frame that they have given.
 
Sly21C said:
I'd advice and say get a fixed rate, most definitely. Interest rates can go up as high as over 20% like it did in the 80s, or as high as over 15% during Tito Mboweni's tenure. You can easily budget with a fixed rate. I personally have a variable interest rate because I thought a fixed rate only applies to motor vehicle financing.
Click to expand...
And by how much has it increased since you signed? If you do not mind sharing
 
Jehosefat said:
The problem with this approach is that they only let you fix it for 2 years at 2% above the current variable rate (give or take) so there is almost no way that the variable rate will go above the fixed rate in the time frame that they have given.
Click to expand...
That is my issue as well... I guess I must jus pray it doesn't go up that much
 
variable, fixed rate almost always works in the favour of the banks because of the very short time period the rate remains fixed

so lets say you fix your rate today, you would need the prime rate to increase by more than 2% within the next year for there to be any real benefit over a five year fixed term

if it applied for the entire period of the loan it would be an entirely different matter
 
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