When Is the Right Time to Switch Your Home Loan? | SA Home Loans

15 May 2024

When Is the Right Time to Consider Switching Your Home Loan

A home loan involves committing to a home loan provider's terms and conditions in exchange for them loaning you money to purchase a property. In this transaction, you get a home to call your own at the end of the repayment period in exchange for sticking to a predetermined repayment term, interest rate and monthly repayment amount. Your home loan provider will determine these specifics based on your calculated risk, financial state and other factors.

Suppose you're currently several months or years into repaying a home loan. You may find that the stipulations you initially agreed to no longer suit your needs as your circumstances or market conditions have changed. Switching to a new home loan provider can help you renegotiate your home loan's package in your favour — but getting the timing right can impact your success.

Here's how to determine when it's an ideal time for you to consider switching your home loan.

What does it mean to switch your home loan?

Switching home loans involves cancelling your existing home loan with your current home loan provider and registering a new loan with a new financial service provider, like SA Home Loans. To do this, you will need to submit an application with the relevant supporting documents to the new home loan provider. You will be required to satisfy the usual credit requirements and affordability assessments. These considerations can differ from one provider to another.

To finalise a home loan switch, you may need to pay cancellation costs, transactional, and conveyancing fees that home loan providers calculate according to your home loan value or outstanding loan amount. Generally speaking, as long as your account is up-to-date, your property is insured, and you have life insurance, you can apply to switch home loans — although your acceptance isn't guaranteed.

What are the benefits of switching your home loan?

Your reasons for wanting to switch home loans can vary, and there's no right or wrong reason for wanting to do so, provided you know the implications of your decision.

Your current financial provider's service delivery or customer service might be lacking or may not offer you value-added products compared to other institutions. Recent changes in interest rates or your financial status could mean you now qualify for a better deal that saves you money or shortens your payment period.

You could switch home loan providers for direct savings in terms of repayments if your new home loan provider is willing to offer you a lower interest rate than what you currently pay. Another option can be switching to access the additional equity available in your property – “equity” being the difference in the value of the property and the amount still owing on it. You can use this difference to pay for much-needed repairs and renovations to your home.

Improving your home's environment can make it more enjoyable and can potentially increase its resale value. For example, you can install solar panels to decrease your dependence on the electrical grid or add water tanks to harvest rainwater.

Is it the right time to switch home loans?

To determine if switching home loan right now is right for you, sit down with your current home loan agreement and ask yourself the following questions:

  • Have I completed my minimum period with my current home loan provider? If not, when will this period end? A minimum repayment period matters, as prematurely cancelling your home loan can result in you having to pay your provider a certain amount of interest or penalties; alternatively, you may need to provide notice of your intention to cancel.
  • Will I be liable for any fees? Your new home loan provider may cover all or some of your fees to entice you to switch over. If this option isn't available or negotiable, your switching costs could be higher than your potential savings.
  • What will my new terms and conditions be? A home loan provider may offer an enticing interest rate but require a prolonged minimum repayment period that keeps you from selling your home or switching home loans before a certain period has elapsed. You could pay what you would have paid with your old home loan provider or more.
  • Can I afford to keep paying my monthly repayment amount? Your new home loan can have the option of lower minimum repayments. If you keep paying what you used to, you could pay off your loan faster and save on interest.

Benefits of switching to SA Home Loans

You could save through consolidating your debt, lowering your interest rate, extending your term and reducing your monthly installments. Our online calculator can help you estimate what you could save by switching to SA Home Loans alternately. Contact one of our specialist property finance consultants on 0860 2 4 6 8 10 or request a Call me back for a free assessment.

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