What you should know about refinancing your home

During the current economic climate, people are actively seeking solutions to lower their monthly expenses in greater numbers. Homeowners who want to release equity or consolidate debt benefit from the ability to refinance their properties. Refinancing your home is beneficial if you wish to increase or decrease the number of borrowers on your loan, transfer from an adjustable to a fixed rate, or take a longer loan term into consideration given the rising cost of borrowing.

How does refinancing a loan work?

While the cost of living has increased, property values in South Africa have also soared in recent years. This indicates that your present home is more valuable than the one you bought a few years ago. If you've owned your house for a while, there's a good chance that its value has increased since you first bought it. When you refinance your house, you secure a new loan for your home based on its current worth rather than the amount it was valued at when you first took out a mortgage.

Refinancing a property can help homeowners decrease their monthly expenses if they so want. Your monthly savings from refinancing your house at a cheaper interest rate could total thousands of rands over the course of the loan.

Accessing your equity

Since South African real estate has increased in value, you could also be able to benefit from a cash-out refinance. This enables you to take advantage of your property's equity.

If you owe R 800 000 on your mortgage but your house is worth R 1 000 000, there is a R 200 000 difference in value. This is referred to as equity. You can make an application to access this equity through home refinancing. Equity is essentially the difference between the amount you owe on an item and its value.

You may access this equity by refinancing your home at a competitive interest rate, which means you'll have the money you need at a cost you can afford. You may then be able to use this equity to improve your financial position or cover significant costs like renovations. It is a good idea to invest your equity back into your property since it will grow in value. The drawback is that if a second bond is taken out, this might result in a position of negative equity because the value of the first bond can also decline.

What is the process for securing refinancing?

Your property will be revalued when you apply for a refinance, and your credit history and affordability will also be examined. The application will be authorised after these evaluations are approved by the lender.

If you are accessing funds set aside for future use or borrowing a portion of the initial mortgage, the money will be made accessible as soon as your application is approved. The money will be paid out when the bond has been registered at the deeds office, which might take up to six weeks if you need to register a second bond.

Bear in mind that the second bond registration fee, VAT, and the deeds office fee are included in the refinancing agreement. The legal fee to file a second bond must be considered against the refinancing advantage.

Get in touch with Knight Frank today for all your property needs on the Atlantic Seaboard. Our property professionals will advise you on the best financing options for your dream property.