August 15, 2005
With SA Homeloans Varifix, you now have to option to fix your home loan for a period of 20 years. There are some important things to keep in mind before signing up for such a long term.
The current Varifix rate is set at about 12%, whereas SA Homeloans and most of the larger banks currently offer between 8.5% and 9.1% on variable loans. This means that if you do fix your rate, interest rates must increase by at least 3% before you will start to break even.
Taking the current economic situation into account, chances of interest rate climbing so much in the near future are slim, but nobody can predict what will happen in 10 or 20 years’ time. Keep in mind that inflation is relatively stable right now, so there is no immediate need to increase the current interest rate.
Keep in mind that if you were to simply increase your monthly repayment to the amount you will have to pay for the new Varifix product, you would have to pay almost R600.00 extra per month on a R300 000.00 bond. That would also mean that you could pay off your bond in only 12 years instead of 20. This would save you about 40% in interest charges during the 12 years (just above R140 000.00 on a R300 000.00 bond).
If you are the type of person who really prefers security, then this might be a great option. In the end, it is still up to you to decide what is best for you and what you are comfortable with.
To read more about Varifix, visit SA Homeloans at www.sahomeloans.co.za
If you would like to apply for a much lower variable interest rate, try SecuBond Mortgage Originators who will find you the best rate at the four leading banks.
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