Time Ripe for Property Buyers to Negotiate Rates and Fees

By Staff Writer

While the introduction of the National Credit Act - coupled with the significant rise in interest rates over the last two years - has made it increasingly difficult for consumers to successfully apply for a homeloan, it currently presents an ideal opportunity for those with good credit ratings to negotiate lower interest rates and fees when buying property.

According to recent statistics released by the South African Reserve Bank, the growth in the value of total homeloans to consumers in March was 58% down from August 2007, a total drop from R17billion to R7billion per month.

"What many people don't realise is that this slowdown puts banks under pressure to meet their growth targets," says Patrick O'Shea, CEO of Engel & Völkers, part of the O'Shea Group. "In negotiating with your bank, I would use reverse psychology on them. Right now, their credit panels are really struggling to make targets. So if you are credit worthy, and you can afford to buy a house, then negotiate strenuously with them regarding your interest rate."

Click here to see if you can save on your mortgage

O'Shea says people should try requesting up to 2 to 2.5% percent below prime, and also ensure that the fees charged on their homeloans are competitive. "Rather than going to only one or two banks, use a good mortgage broker to negotiate on your behalf and get four or five offers. Then play them off against each other to get the best deal. Banks are vying for credit-worthy consumers in today's market and if you are credit worthy, use your negotiating skills."

He says that a 2% or 2.5% reduction in your homeloan rate can impact tremendously on the amount of your monthly repayments. For example, the monthly repayments on a R1 million homeloan granted at prime (currently 15%) amount to R13 167. However, if you can negotiate the rate downwards to 12.5%, your monthly repayments will decrease by R1 806 to R11 361. That is equivalent to a 13.7% drop in your monthly repayments.

Furthermore, once the prime interest rate does start to decline, the percentage saving from the lower interest rate you have negotiated will increase, i.e. if the prime interest rate is reduced to 10%, the interest rate on your negotiated homeloan would drop to 7.5%, and the percentage savings on your monthly repayments would increase to 16.52%.

O'Shea then adds that any extra money that is then put into the homeloan over the minimum monthly payment has a huge effect on the repayment period. For example, a R500 extra monthly payment towards your loan of R1million at a 12.5% interest rate will reduce the term by three years, reducing it to a 17 year mortgage.

O'Shea adds that people should also be negotiating the fees charged by transferring attorneys. "While you cannot negotiate a discount on the transfer duty on your property, as this amount is prescribed by law, make sure you get an adequate discount on the fees charged by the transferring attorneys. This can save you a significant amount of money. Remember, these companies need your business as much as you need them."

Recent Articles

Featured Do you need credit to survive Easter?

Easter weekend is here and with it the expectation of celebration. While there is nothing wrong with this, it often means spending more money than you bargained for.

 

Read more

Young woman building a legacy brick by brick

When her dad passed away, Siyasanga Ngcongca, an internal auditing graduate, took over the family business. Ngcongca Construction, as her company is known, is a service provider to five insurance companies, handling building and commercial claims.

Read more

Can you evict paying residential tenants?

One of the most common reasons for wanting to evict a tenant is non-payment of rent. But there are many other situations that landlords may encounter. These can range from damaging property and breaching contract, to being reported as a continuous disturbance by neighbours.

Read more

How one entrepreneur designed her financial future

From as early as Cannon remembers, she recalls her grandmother seated behind a sewing machine. Through this influence she was sewing her own aprons and doll dresses by the time she was ten, and by the time she was 16, she started designing and make her own clothes.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Hartbeespoort Romantic Weekend Special

Price: R2,999
When: Weekends
Where: North West

Da Vinci Happy Hour

Price: Available on request
When: Weekdays
Where: Cape Town

Glenburn Spa Easter Package

Price: From R1,065
When: 18 -22 April
Where: Muldersdrift