BOND SWITCH

Entering into a home loan arrangement is a very long term undertaking. Statistically most marriages don’t even last that long. It therefore goes without saying that you may at some point want to ‘switch’ your home loan from one bank to another, no, not like the Will Smith song although it may be something he would want to do.

In plain language this the event where a home loan client that has a home loan with bank x decides cancel their home loan with bank x and change to a new home loan with bank c.

There are many reason which my lead a home loan client to consider ‘switching’ their home loan some beneficial, some less so. It is therefore important to do your homework and understand what the implications for ‘switching’ your home loan will be both from a financial and a peace of mind perspective. Below are a number of things that a home loan client wishing to ‘switch’ their home loan may want to consider:

Pros

  • reduced interest rate
  • less administrative costs
  • better banking relationship

Cons

  • new bond registration costs
  • cancelled costs and penalties
  • longer mortgage period
  • worse banking relationship  

The process that will generally be followed when ‘switching’ your home loan includes:

  • applying for a new home loan with the new bank (and meeting its qualification criteria)
  • cancelling the existing home loan (within the required notification periods to avoid penalties)
  • canceling the exiting bond and registering a new bond (which will be done simultaneously in the deeds office)

Lastly, ensure that you review your existing home loan and compare it with the new home loan to ensure that you ‘switch’ receive a like for like product i.e if you previously had a n access facility, you may benefit of that in the new facility and in that instance it may be wise to draw on the facility prior to settlement amounts being calculated.

*Disclaimer: The contents of this article should not be considered as legal, professional, financial or any other form of advice. These are merely views based on the writer’s personal experience. Readers should obtain independent advice on any matter prior to making any decision.

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