Ways to Reduce Your Home Loan Interest Rate in 2024

Your interest rate hinges on two key factors: the prime lending rate, set by the South African Reserve Bank, and the level of risk you represent to the bank. Cultivating a favorable credit history is pivotal for securing lower interest rates. To optimize your savings on a home loan, it’s essential to explore avenues for reducing interest rates, which can lead to substantial long-term benefits. Here’s a breakdown of what determines your interest rate:

Prime Lending Rate: This is beyond your control as it’s set by the South African Reserve Bank.

Risk Assessment by the Bank: This factor is within your sphere of influence. There are several strategies to persuade the bank to offer you lower interest rates:

Credit Record: Maintaining a good credit record is paramount. Consistently paying bills on time, avoiding debt, and settling accounts contribute to a positive credit history.

Deposit Size: A larger deposit diminishes the risk for the bank.

Bank’s Discretion: Different banks have varying leniency levels. Some may be more inclined to offer lower interest rates than others.

Improving your credit record is fundamental for securing favorable interest rates. Here’s what you can do if your credit record needs enhancement:

  • Settle outstanding bills promptly.
  • Ensure timely payment of all incoming bills.
  • Pay more than the minimum installment on your bills.
  • Clear credit card debt.
  • Limit credit card usage to below 30% of your credit limit.
  • Repay store credit, cell phone accounts, and other loans diligently.
  • Minimize opening new credit accounts.
  • Scrutinize your credit report for inaccuracies and rectify them with the relevant credit bureau.
  • Close accounts once the balances are settled.

Enhancements to your credit record typically manifest after about three months, but it’s advisable to wait around six months before reapplying.

You can ascertain your credit score by getting prequalified with O-YES Home Loans. By leveraging our expertise or utilizing our free online prequalification tool, the Bond Indicator, you can determine your eligibility for a home loan and the type of loan you’re likely to qualify for.

Banks exhibit differing levels of leniency in their lending criteria. Due to stiff competition, banks are increasingly amenable to offering favorable home loan packages to attract customers. To capitalize on this, it’s prudent to apply to multiple banks. With O-YES Home Loans, you can streamline this process by submitting applications to multiple banks and selecting the most advantageous package.

In summary, by actively managing your credit record and exploring various options, such as those offered by O-YES Home Loans, you can enhance your prospects of securing low interest rates on your home loan.