All About Interest Rates

The principal amount of your Home Loan attracts interest. Your monthly repayments are proportionally applied to first cover the interest portion of the repayment due and then the capital portion. Regular monthly repayments over the term of the loan, usually a period over twenty years, as stipulated in the loan agreement, are therefore essential in order to service the loan and minimize the interest due, is calculated on the daily outstanding balance of your Home Loan and capitalized on your instalment due date. This means that it is charged to your account on the day of instalment payment. Interest rates may be either fixed for a given term or can fluctuate. A fixed interest rate is an agreed upon interest rate that is fixed (currently prime plus 1.5%) over a pre-determined period of time. It is contracted for a specific term and after this term the rate will revert back to a variable interest rate, unless you opt to renew the fixed option at a rate offered at the time of renegotiating. Monitor the variable interest rate fluctuation to prepare yourself should the variable rate at the end of the fixed rate contract period be much higher than the fixed rate.

A variable interest rate is a fluctuating rate based on the mortgage-lending rate, as set by the Reserve Bank form time to time. Even though this rate is mostly the same as the Prime lending rate, it does not necessarily have to be the same. Monthly repayments are calculated to pay the loan plus the interest over the agreed term of loan, normally 20 years. If interest rates change, so does your monthly repayment amount.

The rate offered to your when applying for a Home Loan will depend on your creditworthiness, ability to repay the loan, the size of the loan and the loan–to-value. (The value of the loan in relation to the value of the property.) Regular monthly repayments over the term of the loan are essential in order to service the loan and minimize the interest debt. Only with a good credit profile we can negotiate a top interest rate for you with the bank, from as little as PRIME MINUS 2%.