Interest Rates

The mortgage lenders standard home loan offers a variable interest rate loan based on the "repo rate" determined by the SA Reserve Bank. This means that the rate will rise and fall along with economic conditions in this country. Some mortgage lenders also offer short term fixed rates where the rate is agreed and remains at that level for up to five years.

In first world terms, rates in South Africa are relatively high, so the interest paid on a 20-year home loan is typically more than the price of the house itself. It makes sense to find the very best deal as every percent reduction in the interest rate creates a huge saving over 20 years. If you can put down a bigger deposit on the property you should be able to negotiate a lower rate.

Interest is calculated on the amount owing on the loan on a daily basis and is added monthly to the outstanding balance. Your loan will be repaid over 20 years, that is, 240 monthly installments. However you can make additional payments into your home loan, or pay more than your required monthly installments thus reducing the time period of paying off your home loan. This will dramatically reduce the total amount of interest paid on the home loan over its life.