Will My Interest Rate Change When I Apply For a 2nd Bond/Further Loan?

I get asked this question many times a day.  But can one really provide the answer in one sentence?

I can provide it in a word, and that is YES.

Your interest rate can most certainly change if you apply for an additional amount on your home loan.

Many simply don’t understand how it works because they reason they earn substantially more than they did when they initially applied for the bond, or that the value of the property has increased greatly due to the increasing value of the area or improvements that have been made to the property.

Unfortunately it’s not that simple, and I’ll try my best to explain to you what the guys in the know at Standard bank home loans have explained to us.

If you look at the market 4-5 years ago, just about everybody was getting interest rate reductions of 1.5 – 2.0% below prime, and the banks have had to honor their agreements with these clients, however, the rule is that when a new or another application is made, that the entire home loan account is re-calculated to the prevailing risk appetite of the bank.

This means, if the bank’s risk appetite is very low at this point in time or if they are borrowing money elsewhere at higher rates, they are unable to give large (or any) reductions on the prime interest rate.

This is especially true if they are borrowing money from international lenders because they are very risk averse when it comes to banks wanting loans to provide home loans to clients after the huge sub prime scandal in the US.

So, although this doesn’t provide a solution to the interest rate you might get, I’m hoping that this would give you more insight into WHY they can’t price what they used to.

If you are interested in applying for Standard Bank Home Loans, please don’t hesitate to contact us, the rate we’ll negotiate for you will the be THE lowest you’re able to get.

* information correct as per time of posting

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