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With the recent and needless to say, drastic changes in interest rate, many are wondering if they should change to a fixed rate. As SAHomeloans gives you the option of fixing your interest rate for up to 20 years, or the full term of your loan. What are the advantages and disadvantages or a fixed rate in comparison with a variable rate?
Fixed Rate
A SAHomeloans fixed rate is exactly what it sounds like. It's fixed. If prime rate goes up or down your rate won't change. This also means your installment is, technically, fixed. Your installment will not change during the period that you have decided to fix your rate.
The advantage of a SAHomeloans fixed rate is that it is easier to draw up a budget that will not fluctuate with any changes in interest rate. You know what your bond installment will be, and you can budget for it easily.
Another advantage is that you will not suffer with a higher monthly installment if the interest rate goes up. However, this can also be the disadvantage of a SAHomeloans fixed rate. If the interest rate goes down, you will still be paying your higher, fixed rate.
Variable Rate
This brings us to the SAHomeloans variable rates. A variable rate will allow you to benefit from any reduction in prime rate. The rate applicable to your mortgage will be reduced in accord with the lower prime rate. This means a lower repayment and better cash flow.
However, if the prime rate goes up, so will your applicable rate. Your SAHomeloans bond installment will increase as well. This might affect your cash flow, and you will have to re-do your personal budget.
Simply put, with a variable rate, your SAHomeloans interest rate and installment will fluctuate according to the prime rate.
Whether a fixed rate or variable rate is the best option is a very individual choice. Some prefer knowing what their SAHomeloans installment will. Others will make sure they benefit from any reduction in interest rate. But it is worth looking into as it can save you money. You can either contact a SAHomeloans consultant, or a mortgage originator to guide you in the right direction.
Well, I know that is a lot for you to take in so I am happy to spend some time with you and answer any questions you have about SAhomeloans and making sure your SAHomeLoan is approved. You are welcome to contact my office at 086 110 6204 or send me a personal email at: info@gpfmortgage.co.za
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