Refinancing your home loan: Everything you need to know

Article summary

• You can refinance your bond to access equity, which is the difference between what you owe on a bond and the home’s actual value.
• The new bond will be registered according to the home’s new value rather than its value when you initially registered the bond.
• Equity can be used to pay off debts, pay for home renovations, install solar panels, and more.

More people are looking at ways to reduce their monthly expenses. Homeowners looking to release equity or consolidate debt have the advantage of being able to refinance their home loan, often at a lower rate, which saves money in the short term.

Refinancing your home loan: What does it mean?

It means you’re applying for a new bond on your home based on its current value, rather than the value it had when you applied for your initial bond.

Why refinance your bond?

It enables you to access equity.

Equity is the difference between the amount you owe on your home loan and the actual value of your home.

For example, if you owe R1 000 000 on a home loan, but the home’s value has risen to R1 500 000, the extra R500 000 is equity.

You can access this equity if you refinance your bond.

How can you use your equity?

The potential uses are myriad. For example:

• Pay for renovations that even further increase the value of your property.
• Pay for solar panel installations. In this age of loadshedding, it’s a smart use of equity to install solar panels. This will add even further value to your property.
• Pay off debt.
• Pay tuition fees.

How to refinance your bond

You apply the same way you would for a bond; and, as with a bond, your credit record will be assessed.

In addition, the home will be revalued.

If the homeowner is accessing equity, the funds will be made available immediately after the home loan is approved.

The funds on the second bond will be payable after bond registration.

How much to refinance a home loan?

You can use our Transfer Cost Calculator to determine what the bond registration will cost.

For example, for a further loan of R1 000 000, the costs would be as follows:

Bond registration costs (incl VAT) R 34,516

Bank initiation fee (incl VAT) R 6,038

Deeds office fees R 1,220

Post, petties, FICA other fees (incl VAT) R 2,200

Seek the advice of a home loan comparison service

ooba Home Loans, South Africa’s largest home loan comparison service, offers free advice on the questions homeowners typically have about the financial implications and costs associated with refinancing their homes.