subject: Options For Loans [print this page] Options For Loans Options For Loans
Not many people can afford to outright buy a house these days and having a home loan can make this ideal much more attainable. A home loan is there to provide financing for the purchase of a house. How much you are able to get is dependent on your income and expenses, also called your disposable income.
One of the options that you will be offered is that of an extended period home loan. You can elect to pay off the bond over a period of thirty years instead of the usual twenty years. Monthly instalments will be less and you may be able to negotiate a lower interest rate. The disadvantage of an extended period is that whilst you are paying less each month, your loan will earn substantially more interest than a standard home loan. It may well be more affordable each month and put less financial strain on you, but it works out to be much more expensive once you have finished paying back what you owe.
You can also consider having either a fixed or variable interest rate. The variable interest rate became quite popular when the economy was doing well and interest rates were falling. This is because your bond interest rate changes every time the prevailing interest rate changes, in whichever direction. If you are lucky, you will see your interest rate dropping like a stone. A fixed interest rate is a better choice in an uncertain economic climate. It stays consistent no matter what the banks do to other interest rates. There is the possibility for gain and loss with both options, it is pretty much luck and economics that determines whether you will benefit from your choice or not.
You can also get a loan to use in building a home. These are called building loans. They differ from regular home loans on a number of aspects. They have the ability to be paid out piecemeal. This means that you are not forced to negotiate with the building company employed to build your home to pay them at the end of the build or risk being cheated by the company if you were to pay them the full amount from the get go. You can pay them as each part of the construction process is completed. You will also only be able to get a building loan if you have contracted an approved building company. This ensures that your home will be built according to SABS guidelines. Another bonus is the fact that you only start paying instalments once the loan has been fully paid out. This means that whilst you are waiting for the building to be completed, you are not suffering financially and whilst you pay for the loan you get the full benefit of the investment.
Taking out a homeloan is the best way to get financing for you to buy your home. A building loan will finance the building of your dream home if you are unable to find it already built and on the market. It will also protect you from having a home that is not built according to the standards of the SABS. You do need to consider all your options to find the best one for you.
