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Small differences mean big savings when buying property

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Q: I have heard that I need to shop around for a home loan in order to get the best interest rate. I have also been told that the higher my deposit, the better my interest rate offer will be. The rates seem to differ in many cases by less than a percent, so how much difference can this really make?

A: By way of example, in the last quarter of 2020, BetterBond was able to secure an average interest rate concession of 0.61% – the difference between the best and worst offers received from all the banks, resulting in an average saving of 0.61% for the buyer. 

To put that into real terms, if your bond was R2 million, you would save R174 000 over the full 20-year term or R725 a month.

Read the latest Property360 digital magazine below

Based on a R2m bond over 20 years, here is a breakdown of the monthly repayments and savings based on different interest rates:

Interest rate                Monthly repayment             Total repayment                           Saving
7% (prime)                   R15 506                                  R3 721 434                                    N/A
6.83%                            R15 302                                 R3 672 612                                    R48 822
6.66%                            R15 100                                 R3 624 108                                    R97 326
6.49%                            R14 840                                 R3 575 926                                    R145 508
6.39%                            R14 782                                 R3 547 734                                    R173 700

The good news story of lower interest rates and improved affordability is starting to spread and we believe that even more home buyers will apply for bonds before the repo rate starts its gradual increase towards the end of the year, or even next year. – Carl Coetzee, chief executive of BetterBond

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