In the dynamic world of property investment, investors continuously seek to optimise their property portfolios and boost financial gains. A powerful tool to do this is through property refinancing.
What is property refinancing in basic terms?
This tool uncovers the latent value of your property, setting you on the path to future property investments and further wealth accumulation.
At IGrow Wealth Investments, our CEO and founder, Jacques Fouché, strongly believes in the philosophy of the “3 R’s” of property investment: Retain, Refinance, and Reinvest. (This philosophy can be seen in this explainer video on IGrow’s YouTube channel.)
This highlights the significance of “retaining” or holding onto property assets while they appreciate over the years. In this way, you leverage the properties’ increased value through property refinancing. Then, you channel the released capital into new investment opportunities by reinvesting in more properties to build real wealth.
What is property refinancing, in more detail?
Property refinancing entails replacing a current home loan with a new one. This is typically achieved under different loan terms. This allows property owners to gain access to the equity built up in their properties, within their property portfolio.
This is because of appreciation (the property increasing in value over time, so it is worth more than when you bought it) and the principal repayment (meaning you owe less on the original loan capital after paying off your bond for a time).
In property refinancing in South Africa, investors can sometimes use this strategy to lower their home loan interest rate and improve the terms on their bond (especially if they move to a different financial institution willing to take over their bond from another bank to gain a client with more attractive loan terms). Refinancing then helps reduce monthly repayments and consolidate debt (Source).
When you decide to use refinancing, banks will assess factors like your credit score, payment history, and the amount of equity in your property. If you have a clear strategy in place, property refinancing can do some of these things, depending on your requirements and the financial institutions involved:
- Provide you with an immediate capital injection to allow you to improve the property (this is usually if you have an access bond facility)
- Improve your home loan terms, saving money long-term
- Gaining access to your property’s equity, to reinvest in another property.
“With the fluctuating interest rates in South Africa, refinancing could be a great option if rates are lower than when you originally bought your home. A lower interest rate could reduce your monthly payments, allowing you to pay off the principal faster. If you’re financially stable, consider refinancing to a shorter loan term, like a 15-year mortgage, to build equity at an even quicker pace.” (Source).
View our recent blog post on the ins and outs of property investment after a change in interest rates in South Africa: South African Interest Rate Cuts Impacting Property Investments.
The true advantage of refinancing
Jacques Fouché strongly advocates using property refinancing as a core strategy for property portfolio expansion. Through refinancing, investors can gain access to the increased equity in their properties without needing to liquidate assets. In other words, you RETAIN your original investment property, so it can keep on bringing in rental income for you and building more equity over time, while REINVESTING equity capital in additional properties to increase your portfolio.
This approach offers several advantages:
- Access to additional capital: Refinancing offers investors an immediate capital release that can be used in the reinvestment of additional properties. This accelerates your portfolio growth by allowing you to raise money for a deposit on a new property and/or use your equity as surety for a new loan.
- Improved home loan terms: IGrow Home Loans will help you negotiate better interest rates or longer repayment periods (loan terms). This will improve the profitability of your rental properties by decreasing bond costs.
- Refinancing your property to consolidate debt: Combining multiple debts altogether in a single loan with a favourable interest rate can lower overall repayment amounts.
Jacques Fouché believes that, “if you have a well-structured property refinancing strategy in the South African property market, you can retain your property and accumulate equity over time through appreciation in property values. You can access this equity to buy further investment properties and build your portfolio and lasting wealth. By following this process, you have applied the 3 R’s of property investment- Retain, Refinance, and Reinvest.”
Property refinancing in the South African property market
The South African property market has shown great resilience and exponential growth over many years in some key locations like Gauteng and the Western Cape in particular. This makes property refinancing a desirable option for investors. The country’s banks and financial institutions offer specific refinancing options personalised to the different needs of property investors.
Get to grips with property market conditions
Having an understanding of property market trends and interest rate fluctuations helps you make informed refinancing decisions.
Know your creditworthiness
Financial lenders (banks and financial institutions) will assess your credit score and finances before they approve a refinancing home loan application.
Let the IGrow bond origination team handle this process for you. IGrow Home Loans is well-regarded by major banks and financial institutions in South Africa, with extensive experience in all the administrative processes involved.
Partner with home loan experts such as IGrow’s home loan division
With nearly two decades in operation, IGrow Home Loans has excellent relationships with these banks and institutions. This makes negotiation on your behalf seamless an dmuch more likely to work in your favour than a personal application to a single bank. In fact, we get an average of 0.5% lower interest rates on bonds, saving you thousands over your bond repayment term.
The team handles your refinanced home loan documentation, applying to several financial institutions to increase the possibility of home loan approval. They also negotiate interest rate and loan terms with these financial institutions, which will compete for your business. This helps speed up the approval process and secure the most preferential home loans.
Practical steps for property refinancing with IGrow Home Loans
Refinancing requires a solid strategy to make sure you can reinvest and grow your property portfolio.
IGrow Home Loans offers investors a streamlined process to secure your refinanced home loan:
- Assessing your current finances: evaluates your existing home loans, interest rates, and repayment terms to look for potential refinancing advantages to capitalise on.
- A property valuation is undertaken: get an updated valuation of your property to find out the available equity you can access through property refinancing.
- Loan Application: partner with IGrow Home Loans. We’ll submit a refinancing application on your behalf. Then we’ll consolidate the necessary documentation, such as salary slips/ proof of income, your credit history details, and your property details, so you don’t have to complete multiple applications’ paperwork on your own.
- Refinanced home loan approval: Upon your reinvestment home loan approval, a new loan is registered. The funds are disbursed, so you can reinvest by paying the deposit on further properties, growing an expansive and profitable property portfolio.
In partnering with IGrow Home Loans, investors have a lot to gain from our qualified experts. You’ll benefit from tailored solutions and strategies that complement your property investment goals.
View IGrow Wealth Investments properties that are available now. Take a look at new investment opportunities and set the ball rolling on refinancing and reinvesting to grow your portfolio with IGrow.
Conclusion
In South Africa, property refinancing is a strategic tool investors use to expand their property portfolios and benefit from financial growth. Investors also use refinancing property to consolidate debt.
IGrow Home Loans helps you unlock equity through refinancing. We ensure a smooth refinanced home loan application journey. The team aims to secure optimal loan terms and interest rates on your behalf.
Understanding the 3 R’s of property investment—Retain, Refinance, and Reinvest—can help investors make wise moves in the property market. The expert guidance and leadership Jacques Fouché offers, together with his dedicated team at IGrow Wealth Investments, make navigating property refinancing seamless and rewarding.
Contact IGrow Home Loans and begin your property refinancing and reinvestment journey today!