It sometimes makes sense to move your mortgage bond from one financial institution to another. The process of doing so is known as a mortgage bond switch.
We have a look at what you should bear in mind when considering a switch, and whether this could be the right move for you.
The benefits of switching your mortgage bond
Nondumiso Ncapai, head of products at Absa Home Loans, notes that with so many competing South African banks, a range of mortgage bond rates are on offer.
“Many people tend to have a high rate on their mortgage bond initially, and later shop around to reduce that rate. The benefit to this is a reduction to your monthly instalment, and the overall repayment amount,” says Ncapai.
Another issue many consumers consider when switching providers is the quality of service they currently, or will, recieve. Reliable service forms a big part of a healthy relationship with your bank.
Potential obstacles to consider
When switching your bond, transactional costs will apply. These will depend on the value of your loan. You will also need to consider the cost of an attorney to re-register the bond, and the associated deeds office fees.
“There are also fees that come into play when closing an account. Sometimes consumers forget to give notice of bond account closure, and because of this, early termination fees are applied,” notes Ncapai.
The advantage of staying and keeping your bond with the same financial institution
“Many banks offer rewards for consolidating your portfolio with them”, says Ncapai. These rewards can range from higher interest rates for savings, to lower transaction fees.
Sticking with your own bank also makes it easier to move money between your bond and cheque accounts. Furthermore, the bank can use your transactional history to create tailored solutions for you.
The process of switching your bond
All of the information needed for a switch can be found on the relevant bank’s website, including bond calculators. You may be asked to supply a valid ID document, proof of income and three months’ worth of bank statements.
“You’ll require less documentation if you are already a customer of the bank from whom you’d like a loan,” says Ncapai.
Once the application process is complete, you will be contacted either by email or telephonically. The next step will be an evaluation of your property, based on which the bank will determine the loan amount it’s willing to offer. Finally, the bond will be re-registered at the deeds office.
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Final points to consider
All mortgage bond account holders should review their financial situation at regular intervals, notes Ncapai. “It could be that you can pay more into your mortgage bond. This gives you negotiation power with the bank,” she says.