Home Loan calculators - what interest rate?

[CathJ]

I'm looking around at property, trying to figure out what I can afford, and I've been using various home loan affordability calculators on the web.

The problem is, they all want an interest rate as input. But you don't know what interest rate you'll be offered until after you've signed an offer to purchase and applied for a bond!

Something I could afford very comfortably at prime (8.5%) becomes something I can, but only just, afford at prime+2.5, and wouldn't give me much room for future rate increases.

So how do you go about figuring out what interest rate you're likely to get, and therefore what you can afford to pay monthly?

 

[rorz0r]

I would use prime for my calculations (because I wouldn't accept anything more) but remember to give some leeway in the budget for possible (unlikely imo) interest rate hikes. Not at all unheard of for the interest rate to climb 2.5% within a year.

Take a look here to see where/how it fluctuates: http://www.tradingeconomics.com/south-africa/bank-lending-rate

 

[Chevron]

On a house most people get below prime. So if you work on prime you should be ok.

Just remember to take bond registration and transfer costs into account.

 

[I.am.Sam]

On a house most people get below prime. So if you work on prime you should be ok.

Just remember to take bond registration and transfer costs into account.

this is not true

depends on income and as well as deposit and also if you are a 1st time home buyer

 

[F1 Fan]

I would say work on prime + 1.5 if you have a clean credit record.

Remember to add transfer costs (+-30 for R800 000 loan).

 

[Paul_S]

On a house most people get below prime. So if you work on prime you should be ok.

Just remember to take bond registration and transfer costs into account.

Very unlikely judging from previous threads about home loan interest rates.
It seems prime to prime +0.5% is common and anything below prime is a bargain.

When I purchased property I factored in a margin of 5% in case of an interest rate cycle and pay anything spare into the bond.
I can now afford an interest rate cycle of up to 20% without defaulting on payments.
So yes, I got less house than I could have afforded but I can sleep soundly at night knowing that the roof over my head is not going to disappear.

 

[TheGrove]

this is not true

depends on income and as well as deposit and also if you are a 1st time home buyer

+1 Just went through the process, my income is more then sufficient, my credit rating is extremely good, went through a mortgage broker and managed to finally get one of the banks down from 12% to 9.3% but the other banks would not budge.

 

[Ecco]

There was a thread on what interest rates people were getting on for their home loans last year. Have a search on the forum.

If i remember correctly a lot of people were not getting less then prime.

 

[Ecco]

+1 Just went through the process, my income is more then sufficient, my credit rating is extremely good, went through a mortgage broker and managed to finally get one of the banks down from 12% to 9.3% but the other banks would not budge.

12%!!!! Thats madness, how rude of them to even give you an offer with such a ridiculous amount!

 

[Paul_S]

+1 Just went through the process, my income is more then sufficient, my credit rating is extremely good, went through a mortgage broker and managed to finally get one of the banks down from 12% to 9.3% but the other banks would not budge.

Don't forget that a joint purchase with two or more parties all with permanent employment reduces the risk profile quite a bit.

 

[CathJ]

I would use prime for my calculations (because I wouldn't accept anything more) but remember to give some leeway in the budget for possible (unlikely imo) interest rate hikes. Not at all unheard of for the interest rate to climb 2.5% within a year.

Take a look here to see where/how it fluctuates: http://www.tradingeconomics.com/south-africa/bank-lending-rate

This is it - at a starting point of prime, I can absorb a rate increase of 2 or 2.5% with no hassle. At a starting point of prime+2, it would be more difficult to absorb a 2% rate increase. So if I'm likely to start at prime+2 and want room to absorb increases, I need to look at a cheaper segment of the market.

It sucks - you can't really know what you can afford to look at until you've chosen a place and applied for the bond!

 

[Ou grote]

I got prime minus 0.7%.

Highest I heard of is Prime plus 2%.
These were self-employed people.


Talk to Ooba or betterbond, they'll give you an idea.
Your bank will as well,

 

[Ecco]

I got prime minus 0.7%.

Highest I heard of is Prime plus 2%.
These were self-employed people.


Talk to Ooba or betterbond, they'll give you an idea.
Your bank will as well,

Excellent rate. You a lucky man.

But to make it relevant, when were you offered this rate - things changed a lot from 2009 onwards.

 

[Ou grote]

Excellent rate. You a lucky man.

But to make it relevant, when were you offered this rate - things changed a lot from 2009 onwards.

In December 2012 for the house I just bought.


In December 2006 I got Prime minus 1.7% for my flat.

 

[CathJ]

I got prime minus 0.7%.

Highest I heard of is Prime plus 2%.
These were self-employed people.


Talk to Ooba or betterbond, they'll give you an idea.
Your bank will as well,

Spoke to FNB, they won't give you any idea of rate until you have a signed Offer to Purchase. They don't even run their "passport to purchase" program any more, despite what it says on the website.

I'll try ooba, see what they say.

 

[Ou grote]

Spoke to FNB, they won't give you any idea of rate until you have a signed Offer to Purchase. They don't even run their "passport to purchase" program any more, despite what it says on the website.

I'll try ooba, see what they say.

They won't give you an official one, but I asked the teller there and she gave my an estimate.
Was at the N1 City branch.

I used bettabond.
FNB offered -0.4% the first time and -0.7% the 2nd time.
ABSA -0.6%,
Standard -0.3% and
Nedbank didn't bother.

 

[WR10]

12%!!!! Thats madness, how rude of them to even give you an offer with such a ridiculous amount!

Absa offered me 13.40%

my credit record is brilliant and its a joint-bond application

No deposit thought

SA homeloans and nedbank offered 9% and 9.3% but a 90% bond

 

[TheGrove]

Don't forget that a joint purchase with two or more parties all with permanent employment reduces the risk profile quite a bit.

It was a joint purchase, both permanently employed.... and a 10% deposit

 

[Billy]

I'm looking around at property, trying to figure out what I can afford, and I've been using various home loan affordability calculators on the web.

The problem is, they all want an interest rate as input. But you don't know what interest rate you'll be offered until after you've signed an offer to purchase and applied for a bond!

Something I could afford very comfortably at prime (8.5%) becomes something I can, but only just, afford at prime+2.5, and wouldn't give me much room for future rate increases.

So how do you go about figuring out what interest rate you're likely to get, and therefore what you can afford to pay monthly?

Just remember that the rate can go up. The prime rate has been to 25.5% wef 1998-08-31.

You should always factor in the potential for an increase.

I took out a loan in 1985 at 25%, prime at the time, see what that does to your budget.

 

[CathJ]

Just remember that the rate can go up. The prime rate has been to 25.5% wef 1998-08-31.

You should always factor in the potential for an increase.

I took out a loan in 1985 at 25%, prime at the time, see what that does to your budget.

Sure, but you can't reasonably plan to absorb a 25% increase. It worries me, yes, but I'd have to buy a hovel to be able to absorb an increase that big *now*. In 5 years or so, yes, I could probably absorb that (taking into account salary increases, bonuses, etc, all of which would go into the bond).