We have always wondered whether you should pay cash up-front for the home loan initiation fee for banks or if you should include it in your loan.
The thinking fro m our side at Wizard Midrand is that if you add this to the 20 year financing option it means that you will pay the price for this loan portion. If the fee is R 4,500.00 over 20 years you will pay R 9,891.36 an additional R 5,391.36 over that period. Better use a credit card or cash and pay it quickly. But that is not what cash strapped South Africans want to hear.
In all fairness, it is not for all mortgages, but instead, the targeted loan groups for this process are homeloan applications approved in the 90% to 100% area only.
As stated by ABSA – Loan to Valuation bands, where ABSA, would prefer not to allow for the capitalization of the initiation fee is in this 90% to 100% band only.
Of course this process will have an affect on both the application customer and attorney as follows:
Customers: To be advised during the application process that the Home Loan initiation
fee is to be paid in cash to the Attorney before registration of the bond
Attorneys: The funds must be paid into the attorneys trust account. On date of
registration, the attorney must pay these funds directly into the home loan account.