SA Home Loans : Edge vs Variable

[rainbow84]

So, we are currently in Edge, which you only pay the installment for first 3 years, before reverting to normal standard loan.
We are currently in 2nd year of repayment.
Lets say we pay 8k per month. We are now thinking of paying an extra 2k per month (to help make the repayment shorter possibly).

Is it actually better for us to be in Edge or Variable Home Loan? Or is there not much difference?

Edge : https://www.sahomeloans.com/OurProducts/HomeLoanProducts.aspx#4
Variable : https://www.sahomeloans.com/OurProducts/HomeLoanProducts.aspx#1

 

[marco79]

Edge you only pay interest on your loan for 3 years, then the 20 year loan kick in. My personal feel is that if you cannot change to the normal 20 year loan now, then just pay the additional R2000 into the loan account.

 

[Icarium]

So, we are currently in Edge, which you only pay the installment for first 3 years, before reverting to normal standard loan.
We are currently in 2nd year of repayment.
Lets say we pay 8k per month. We are now thinking of paying an extra 2k per month (to help make the repayment shorter possibly).

Is it actually better for us to be in Edge or Variable Home Loan? Or is there not much difference?

Edge : https://www.sahomeloans.com/OurProducts/HomeLoanProducts.aspx#4
Variable : https://www.sahomeloans.com/OurProducts/HomeLoanProducts.aspx#1

If you just paid the bare minimum, you'd pay more over the life of the loan on the Edge product. But assuming the interest rates are the same, once you start paying extra there is no practical difference.

 

[HavocXphere]

Is it actually better for us to be in Edge or Variable Home Loan? Or is there not much difference?

Edge is a really bad idea. Its a marketing gimmick at best. The only valid use for it is during *temporary* emergencies or if you know for certain that you'll get a massive salary raise soon.

We are currently in 2nd year of repayment.

No, actually you're not. Per Edge you pay interest...meaning you haven't *repaid* a single cent yet. i.e. You've been suckered by said marketing gimmick. If you can pay the extra 2k do so immediately.

Edge was originally conceived as an "emergency measure" type thing...until the sales ppl realised they can fool ppl into thinking they're paying a lower premium than anywhere else. If you search the forums, you'll find other posts about it. Wasn't called Edge back then though afaik.

 

[FlashSA]

EPIC RESURRECTION

I disagree with you, HavocXphere. EDGE gives you a bit of comfort when taking on a bigger bond which most people do when buying a better house. Sensible people would quickly start putting more monthly payments into the bond as soon as they financially can to get used to the bigger repayment which starts in month 37th.

I don't think it is a marketing tool. We are going this route now as it has helped with affordability for the next 12 months. in month 13 I will start putting a third of the difference between what the full repayment will eventually be and the interest only instalment into the bond every month. In month 25 I will add another 1/3 (making it 2/3) so that when month 37 comes around, I am used to paying the full instalment.

I will also put any spare cash into the bond instead of a fixed deposit in those 36 months in order to reduce the total interest over the 23year bond.

 

[HavocXphere]

EPIC RESURRECTION

I disagree with you, HavocXphere. EDGE gives you a bit of comfort when taking on a bigger bond which most people do when buying a better house. Sensible people would quickly start putting more monthly payments into the bond as soon as they financially can to get used to the bigger repayment which starts in month 37th.

I don't think it is a marketing tool. We are going this route now as it has helped with affordability for the next 12 months. in month 13 I will start putting a third of the difference between what the full repayment will eventually be and the interest only instalment into the bond every month. In month 25 I will add another 1/3 (making it 2/3) so that when month 37 comes around, I am used to paying the full instalment.

I will also put any spare cash into the bond instead of a fixed deposit in those 36 months in order to reduce the total interest over the 23year bond.

You missed the point of my post by approximately 100%. There used to (allegedly) by salesmen at that company that used the artificially low payments to get people to buy bigger than they could afford...not realizing that its a temporary thing.

As for your plan - to each his own. I hope for your sake you crunched the numbers on this carefully though...if you're cutting it so damn close that you can only afford the "better house" & "bigger bond" only via this then there is little room for errors. Personally I'd consider that cutting it a bit too close for my liking, but thats just me. Perhaps you know you'll get a sizable salary increase soon or something.

 

[FlashSA]

Edge is a really bad idea. Its a marketing gimmick at best. The only valid use for it is during *temporary* emergencies or if you know for certain that you'll get a massive salary raise soon.

I have re-read this and it reads to me as "EDGE is purely marketing with no substance".

I once again disagree. It CAN be a valuable tool if used in the right situations. I do agree with you on 1 point - if you are 100% sure of consititant, large annual increases then "buying up" and using EDGE has minimal risk.

It of course helps to have a financial head when using a product like this otherwise the repayments WILL run away from you...

 

[P924]

If you have to start your bond on EDGE, you are on the edge of disaster. Interest rates WILL increase again this year, meaning that if you are already on the edge, this will push you over. People struggling to make payments after the increases are the only ones with a valid excuse to go to an EDGE type of product. If you need to start your bond on EDGE, you are living beyond your means.