Even a 0.25% reduction in your mortgage could save you tens of thousands of rands, but how open is your bank to the discussion? Maya Fisher-French finds out
WILL YOUR BANK BE OPEN TO NEGOTIATION?
City Press spoke to the banks to find out what criteria they would consider when it came to an application to reduce an existing mortgage rate.
Through the responses, FNB appeared to be the most willing to review a mortgage rate, which was borne out by our reader experiences.
FNB: According to Stanley Mabulu, FNB home finance division channel management head, in terms of FNB’s home finance product rules, “an application for a rate review can be submitted and possibly considered 24 months after the date of registration of your bond”.
When making the assessment, FNB would consider the following factors:
● Credit score: If your credit score has improved since taking out the loan, there is a chance you could qualify for a better rate.
● Variables of home loan account: If your income has increased significantly or if the value of your property has increased, those would be positive factors when negotiating a better rate.
● Reduction of outstanding balance: If you have been paying extra into your mortgage and the original outstanding balance has been reduced by 15% equal or greater to the registered bond amount, FNB will consider a reduction in your interest rate. You need to decide if you are prepared to forfeit access to those prepaid funds to have a lower rate.
Standard Bank: Standard Bank’s approach is to only offer a better rate if you extend the loan. The bank’s costs of running a mortgage book are fixed, so a bigger loan would mean more profit, hence the ability to offer a better rate if you can afford the repayment.
Andrew van der Hoven, head of home loans at Standard Bank, says: “The most common option is where further lending is applied for as the repayment history is considered when the price on the further loan is negotiated. Standard Bank also offers additional value for customers who re-bond their property with Standard Bank or where additional properties are added to existing facilities.”
Van der Hoven adds that the bank will offer better rates to its own customers, so it pays to do your primary banking business with the same bank as your home loan.
Absa: Absa will assess on a case-by-case basis, but is not that keen, even if your risk rating changes.
Geoffrey Lee, managing executive of home loans at Absa, says: “It is important to note that a home loan is a long-term transaction entered into over a number of years. Mortgage interest rates are based on the overall risk profile of the customer at the time of inception of the home loan. In other words, the borrowing risk that the bank carries is based on the risk profile of the customer at the time of approval of the home loan.
“Given the duration of the loan agreements, it is probable that the circumstances of customers may fluctuate over time. With this in mind, it would not be practical for the bank to adjust the interest rates [positively or negatively] whenever the customer’s risk profile or credit history improves or deteriorates.”
Nedbank: Nedbank is definitely not keen to reassess a customer’s mortgage.
The bank says: “We have provided the best rate at the time of application given the customer’s history with the bank and risk grading at the time. The National Credit