Not many people can afford to outright buy a house these days and having a home loan can make this ideal much more attainable. A home loan is there to provide financing for the purchase of a house. How much you are able to get is dependent on your income and expenses, also called your disposable income.

One of the options that you will be offered is that of an extended period home loan. You can elect to pay off the bond over a period of thirty years instead of the usual twenty years. Monthly instalments will be less and you may be able to negotiate a lower interest rate. The disadvantage of an extended period is that whilst you are paying less each month, your loan will earn substantially more interest than a standard home loan. It may well be more affordable each month and put less financial strain on you, but it works out to be much more expensive once you have finished paying back what you owe.

An home loan will also offer you the option of a fixed or variable interest rate. A fixed interest rate is set at the time of originating the bond. It is fixed and does not change for the entire period, no matter what the interest rate of other accounts does. A variable interest changes in accordance with the prevailing interest rate as set by the banks. With a fixed interest rate, you are safe from unexpected hikes in the prevailing interest rate, but also do not benefit from drops in the interest rates. The opposite is true for variable rate home loans. Should interest rates go up or down, your interest rate changes along with them.

You can also get a loan to use in building a home. These are called building loans. They differ from regular home loans on a number of aspects. They have the ability to be paid out piecemeal. This means that you are not forced to negotiate with the building company employed to build your home to pay them at the end of the build or risk being cheated by the company if you were to pay them the full amount from the get go. You can pay them as each part of the construction process is completed. You will also only be able to get a building loan if you have contracted an approved building company. This ensures that your home will be built according to SABS guidelines. Another bonus is the fact that you only start paying instalments once the loan has been fully paid out. This means that whilst you are waiting for the building to be completed, you are not suffering financially and whilst you pay for the loan you get the full benefit of the investment.

Home loans offer a variety of financing options for you to consider when the time comes to buy your home or build a home if you cannot find your dream home. Building loans can protect you against noncompliant building companies and allow you to only start paying once the loan has been fully paid out. Consider all your options before choosing your loan and make sure you can afford the repayments.

For more absa home loan tips, as well as more information on in-house bank insurance, visit our insurance website.