In an effort to stream line your finances and save money, you might consider switching your home loan. Thousands of homeowners do it all the time for a variety of reasons. It might be to get a better rate or to consolidate all your finances with one lender. Maybe a lender is advertising a very attractive deal that you would like to take advantage of. Whatever the reasons, do your homework, make comparisons and above all – read the fine print.
First Things First:
Switching loans takes the same magnitude of thought and consideration as getting a mortgage in the first place. Unless money is no object, you want to be sure the switch is economically beneficial to you in the short and long term. What seems good at first glance may be not so good in the overall picture.
Before switching your home loan, ask your current lender to consider renegotiating your loan. If they are open to that, and you are able to get a good rate, consider staying put with your home loan. You will undoubtedly save on exit fees, transfer fees and any early payback fees and penalties. If you cannot renegotiate, send your current lender a letter requesting the loan be transferred to another institution. Your current lender will provide you with a letter of consent allowing you to seek out a new lender. The letter will contain details such as loan(s) taken, outstanding amount and prepayment charges and penalties. With the letter of consent in hand, you can shop around for a new loan.
Evaluate The Fees Involved:
Since lending money is business and money is made through interest on home loans, it will cost you some money to switch loans. Some of the fees involved are transfer fees, switching fees, reevaluation fees, exit fees, early repayment penalties, legal fees and application fees. The fees will either be fixed fees or a percentage of the refinanced value. These fees could be as low as a few hundred rands or as much as R10,000 or more. The savings in the long run should be greater than the sum of the fees to make the switch. Investigate the fees involved thoroughly and read the fine print for any hidden fees before signing on the dotted line.
Getting The Deal Done:
In order to switch your home loan, it will be necessary to go through the application process. The new lender will establish the value of your home, your ability to repay a loan based on your credit history and employment record. This is where a very good repayment record will come in handy. Once your new loan has been approved, the necessary documents the first lender holds as security for the property will have to be transferred to the new lender. It will be a case of catch 22 where the first lender will want the repayment funds before the documents are released, and the new lender will want the necessary documents before the new loan is released. The two lenders will eventually agree upon a time frame in which the exchange will take place. Make sure you understand when your obligation to the first loan ends and the second one begins. You may be obligated to both for a short period of time.