I got a home loan, what’s next?
03 November 2017
If you’ve secured your first home loan, you’re well on your way to officially becoming a home owner. The good news is that you’ve made some big strides already, but chances are that there might also be a bit of anxiety amongst the happiness. The next step is to structure your home loan so that it best suits your unique financial situation. While you have a wide variety of options with Absa, too many choices could cause some confusion. Not to worry though, you’re in the right place for some handy tips to help you make informed decisions.
We took some time to ask Roedolf Brits, the product manager at Absa Home Loans, a few of those burning questions about options, such as MultiPlan, Further Advance, ReAdvance and FlexiReserve. By the end of this post, you should be armed with the necessary knowledge to make a success of this new chapter in your life.
How can my home loan benefit me?
First things first – what’s in it for you? A home loan gives you the financial capacity to ultimately buy that dream house, but it also comes with great financial responsibility. Brits explained that apart from the added pressure, there are a lot of benefits that come with owning property.
“A home is a fixed asset that is expected to grow in value going forward. A home loan also provides you with convenient options such as debit order payments that guard you against falling into arrears and secure e-statements.”
What is Multiplan and how can I use it to structure my home loan?
Once your home loan has been approved, but before it is registered, the next step is to structure it. You’re in luck if you’ve chosen Absa, because with us you have access to MultiPlan. This is a unique offering in the home loan industry, which allows you the freedom to structure your home loan as best suited to you.
Brits explains that MultiPlan has many benefits, including an option to split the loan amount into a number of separate accounts. In the case of a joint home loan with multiple participants, MultiPlan allows each participant to structure their portion of the loan into different accounts, each with its own designation, statement, repayment term and debit order. This helps each participant manage a portion of the total home loan, but remember that even though the home loan is split, all participants remain jointly and severally liable for the total loan.
Other MultiPlan benefits include:
- Separate loan amounts used for different purposes, structured over different repayment terms.
- Loan repayment debit orders to be drawn from different accounts.
- Freedom to structure your home loan into different accounts with fixed or variable rate options to hedge against interest rate fluctuations.
What is Further Advance and ReAdvance?
With Absa, you have two options when you want to increase your home loan amount or access the funds that you’ve already paid off on your loan. As we’ve mentioned, these options come in handy when you need some additional money for things, such as renovations, expanding your home or other purposes.
“Further Advance is taking your original granted loan amount to a higher level, assuming that your property has increased in value since you purchased it. You can use this option either when you make use of existing equity or if you’re planning alterations or extensions to your home, which will add that specific value after it has been completed.”
At the same time the Re Advance option takes your loan back to its original amount. For instance, if your loan was to the value of R1 million and you’ve already paid off R300 000, you can apply to have access to the amount already paid off, taking the loan back up to R1 million.
According to Brits, one of the most renowned differences between these options, is that you’d need to register a further Bond when taking up a Further Advance, whereas with Re-Advance you don’t need to register a further Bond, because your security is already in place. Still uncertain about the differences between these options? Simply click here.
A MultiPlan is a great way of creating a separate account for the above options. For example, to match the payment term to the use of the funds, for example where you installed a PV Solar solution with an expected life of 10 years.
How does Absa’s FlexiReserve work?
Apart from the above mentioned options, you can also have the FlexiReserve facility on your loan. This simply allows you to access funds that you’ve already paid over and above the minimum monthly payment on your loan.
“FlexiReserve allows you to pay in additional funds, which has a huge interest saving to you. Remember, on home loans we calculate interest on daily outstanding balance, so every time you pay in an amount, your interest payment factor decreases,” Brits explained.
A huge benefit of FlexiReserve is that, should the need arise, you have access to all the monies you have paid in over and above the minimum repayments due.
How do I know which of these options is best for me?
With so many great options at your disposal, it could seem like an impossible task to choose which will be the best for you, right? Not to worry – we’ve gathered some final valuable advice from Brits to help you make those decisions.
“Further Advance and Re-Advance become a factor further down the line, but if you’ve just recently gotten a home loan it’s important to first decide between a fixed rate and a variable rate, as well as how you can protect yourself from interest rate hikes. What you can do there, is take up a MultiPlan and split the rate between the Primary and Secondary accounts.
Furthermore, FlexiReserve is granted by default on all new Absa home loans, so this interest-saving option is immediately available to you.
There you have it – all the important information you need, in one place. You can always add some options later on, or go in-branch and have a chat to one of our friendly staff members who can provide you with any additional information. May your new home bring you nothing but happy living and good memories!
Want to find out more? Go to www.absa.co.za/Absacoza/Individual/Borrowing/Home-loans
Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.