Owning your first house and you need a Bond, What are my options?
Bonds fall into two categories ? bonds with a fixed interest rate and bonds with interest rates that fluctuate during the loans duration. Fixed interest rates are more popular because the client always understands where they stand with the interest.
Fixed rate bonds are popular among home owners because the rate will never change. Basically most owners do now want to do the math and sit down and constantly analyze a bond with a fluctuating interest. There is nothing wrong with that.
Most fixed rate bonds run between twenty to thirty years, which is definitely a long time. A lot of people would rather stick to something around fifteen years, which is fine if they have a higher than average equity along with an income sufficient to meet the higher monthly payments.
Obviously, it would make a very ideal situation if clients could individual call out a number of years and the bank would offer a bond for that period, but that is not the case. Banks are willing to offer bonds in five year increments, staring with fifteen which is becoming more popular. Another common number is twenty five years which is a reasonably agreement between the bank and client.
Individuals sometimes take a liking to bonds where the interest rate fluctuates because they can stay in close connecting with the interest payments. Some bonds begin with a fixed rate of interest over the first ten years or so. People like these bonds because they can calculate how much interest and how much interest they are paying.
The homeowner may wish to request an adjustment with the interest based on the current economy. The bank is more than happy to meet this request, but will charge fees for doing so. It's worthwhile to make the request if you can afford the fees.
However, you also run a risk of seeing a higher interest rate with bonds that fluctuate the interest. It's one of those up and down, rollercoaster rides. Like Forrest Gump said, "you never really know what you're gonna get."
A lot of people would rather avoid the risk of inflated interest rates, and instead turn to a fixed interest rate that they can depend on.
Fixed rate bonds are popular among home owners because the rate will never change. Basically most owners do now want to do the math and sit down and constantly analyze a bond with a fluctuating interest. There is nothing wrong with that.
Most fixed rate bonds run between twenty to thirty years, which is definitely a long time. A lot of people would rather stick to something around fifteen years, which is fine if they have a higher than average equity along with an income sufficient to meet the higher monthly payments.
Obviously, it would make a very ideal situation if clients could individual call out a number of years and the bank would offer a bond for that period, but that is not the case. Banks are willing to offer bonds in five year increments, staring with fifteen which is becoming more popular. Another common number is twenty five years which is a reasonably agreement between the bank and client.
Individuals sometimes take a liking to bonds where the interest rate fluctuates because they can stay in close connecting with the interest payments. Some bonds begin with a fixed rate of interest over the first ten years or so. People like these bonds because they can calculate how much interest and how much interest they are paying.
The homeowner may wish to request an adjustment with the interest based on the current economy. The bank is more than happy to meet this request, but will charge fees for doing so. It's worthwhile to make the request if you can afford the fees.
However, you also run a risk of seeing a higher interest rate with bonds that fluctuate the interest. It's one of those up and down, rollercoaster rides. Like Forrest Gump said, "you never really know what you're gonna get."
A lot of people would rather avoid the risk of inflated interest rates, and instead turn to a fixed interest rate that they can depend on.
About the Author:
Graham McKenzie is the content syndication manager at BondCredit.co.za South Africans leading Bond Originator
posted by Credit Counseling at
5:32 AM
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