Securing a reasonable home loan can be a tricky business

Zweli Mokgata

Zweli Mokgata

A home loan can be the best investment a person can make. But without the correct information it could turn out to be a huge mistake.

"There's no specific law that guides banks on the amount they can discount mortgages by. But I've noticed that when you buy a house for more than R500000 you get a better interest rate." said Realty Executives broker Dan Makgopela.

Banks structure the mortgage repayment terms on the current interest rate (13percent) and usually set the repayment interest rate below the standard rate.

In a bid to compete, banks offered varied interest rates and a bond originator would be able to help a customer find the best deal, Makgopela said.

"The property sector sets its base interest rate at 11,72percent, but we always ask for a lower interest rate for our clients," Makgopela said.

"You can pay as little as 10,5percent in interest for a 20year bond."

Makgopela said people looking for lower interest rates had gone to the extent of seeking a slightly higher price in order to lower their interest rates.

"A client made an application for a property worth R430000 and the bond came to a total of R489000 with an interest rate of 10,9percent instead of the nominal rate of 13percent." Makgopela said.