What is the best bank for home loans in South Africa?

What is the best bank for home loans in South Africa?

Are you wondering what is the best bank for home loans in South Africa? If you’re planning on buying a property in SA, you can either pay cash or get a home loan.

A home loan allows you to fund purchasing your home by getting a loan from the bank, making homeownership a reality for many people. The bank does reserve the right to refuse applicants home loan application.

If one does get approved, they would have to pay interest on the balance of the loan. Do not apply to just one branch. Each bank has different criteria for lending, and some banks may offer you lower interest rates. Shopping around as a home buyer will increase your chances of getting the best price. 

What is an interest rate on a home loan?

Interest rates for home loans differ depending on the Bank’s lending conditions and the applicant’s financial condition. As such, each applicant will be different. The interest rate on home loans is the charges the bank has on an applicant for the risk they take by loaning you money.

It determines how much you’ll have to pay the bank, beyond the actual value of the home you ‘re buying. As a home buyer, while applying for a bond, one goal would be to secure the lowest interest rate possible. And when you obtain the home loan, you can do whatever you can to lessen the repayment period and the interest one has to pay.

In the long run, you will save a lot of money. South Africa’s Mortgage lending rate: Bank: Dwelling Units was 9.750 % in February 2020. 

best bank for home loans in South Africa

How to find the best bank for a home loan in South Africa?

One can look at South African banks’ general results and customer satisfaction scores to get an indication of which bank provides the highest quality service and the best understanding of the needs of their customers.

  • A bond originator will tell you better than any consumer service survey when it comes to finding the best banks for home lending in South Africa. 
  • An impartial bond originator will compare your home loans, allowing you much more exposure to options than if you went directly. 
  • Since they closely know the business, the bond originators often know which banks are best for pre-approved home loans.

The new South African Consumer Satisfaction Index (SAcsi) results show that Capitec customers are the most pleased and that the bank ‘s customers are the most loyal in the country along with those of FNB.

The SAcsi 2016 satisfaction scores for South African banks were:

  • Capitec – 83.1
  • FNB – 81.3
  • Nedbank – 77.0
  • Absa – 74.2
  • Standard Bank – 71.9

Given proof that some banks provide better customer service than others, it’s never your best bet to go straight to your home loan. A bond originator can tell you there are things that no index ever will. You can’t say if a bank has the best deal if you’ve only approached one bank. Originators and associates are active in obtaining funding for home loans for one in three applications which a bank initially rejects.

In short, if you go through a bond originator you have a far better chance of getting the thumbs up on your home loan. Originators lessen the stress of the application process.

What is the best bank for home loans in South Africa?

The following table indicates home loan offerings from Nedbank, Standard Bank, Absa, and First National Bank (FNB). This also compares the monthly payments for operation, initiation payments, cash deposit fees and early termination process. This data is from a comparison made in August 2019.

BankMonthly service feeInitial Fee Cash deposit feeEarly termination process
ABSAR69R6037.50R4,50 + R1,50/R100If a large agreement (including all mortgage agreements) is cancelled, an early termination charge may be levied equal to a maximum of 90 days’ interest, which will be reduced proportionately with any notice period given.
FNBR69R6037.50R10.95 (R20-R1000)
R13.95 (R1000-R3000)
An early termination fee is charged when a home loan is cancelled without giving 90 days’ notice. The fee is calculated based on the outstanding balance at your current interest rate.
Standard BankR69R6037.50R8,07 + R1,82 per R100,00 or part thereofShould you wish to cancel your bond before the agreed contracted loan term, you are required to provide 90 days-notice in writing. If the required notice has not been given or if it has expired you will be charged 90 days pro-rata interest based on your outstanding balance at the time of request for cancellation.
NedbankR69R6037.00R30 + R1.51 per R100
or part thereof
The early-termination fee is determined as three months’ interest (based on your outstanding balance, interest rate and remaining loan term). If the bond is cancelled before the 90-day period, the pro-rata amount will be charged for the
remaining days.

The banks listed above all share the same monthly service charges, initiation fee and early termination process. Differences are seen in the cash deposit fee where Absa has the lowest deposit charges. The interest rate is an important deciding factor as it determines the loan costs and influences the price of your instalment.

However, this is hard to compare on a general basis, because the interest rate is also dependent on various factors. Which include evaluations of the viability, the credit history of the borrower, prevailing economic conditions and the duration and length of the loan.

If the interest rate is not fixed, it may fluctuate as the repo rate and other economic factors change. What is important to note is that consumers have the option to set their interest rate, enabling them to pay one staple interest rate for the repayment period. According to the above comparisons, ABSA would be the best bank to take out a home loan with.

If you are on the lookout for a new home, you should:

  • Be clear on what you’re looking for in a house. Ensure it meets the desires, aspirations and lifestyle of your family and yourself. 
  • Be realistic about what you can afford, and the status of your credit and financial profile.
  • Search around for the deal that best suits you. 
  • If you are venturing to other online lenders and entities outside of the banking system, ask questions and ensure you are dealing with a legitimate organization.

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