The benefits of switching banks

The benefits of switching banks

Private Property South Africa
Kerry Dimmer

The banking sector has become a thriving if not highly competitive market with the explosion of smart apps, online services, and new banking brands. In fact there are so many tempting options currently that switching banking institutions to avail of new or better services can be an overwhelming decision. However, the major drawcards in making a switch of a home loan provider, have historically always been to enjoy improved interest rates and being able to access more equity.

Nondumiso Ncapai, Head of Product at Absa Home Loans explains that most banks offer reduced interest rates for customers who switch their home loan. “Switching to access more equity largely comes into play when, for example, a customer has applied to their existing home loan provider for a further advance on their home loan and been denied. When a switch is made, the bank that secures the new customer may be open to extending more credit on a further advance basis,” says Ncapai.

Advantages and disadvantages of switching

A switch comes with many advantages over and above interest rates and access to equity, and more so if all of an individual’s banking accounts are with one institution. “Customers who approach the bank that they have their primary banking relationship with, are more likely to obtain the best value all round because there is a better understanding of the customer needs so tailored products and services, such as the best mortgage rate possible, can be provided,” says Ncapai. “Simply put, the deeper the relationship with the bank, the better are the rewards.”

However there are a few disadvantages; the loss of rewards being one of those. You may want to consider switching both your home loan along with other products such as your transactional account to get the best value from your bank. Most banks offer a Rewards Programme, especially for customers who have multiple products with the same bank. When you make a switch, even just a home loan account, there is a chance you will sacrifice any rewards earned. Secondly, when making a switch, the new banking institution will undertake a full affordability and credit assessment.

“The customer needs to ensure two things during their banking history: that they have kept their credit score satisfactory and managed their current loans. In addition, the customer also needs to be able to afford the new home loan instalment that has been determined by the new banking provider,” says Ncapai. “This comes with yet another financial consideration in that a new bond registration is required when a customer switches over their home loan.”

The Absa Home Loan switch offering

Absa’s switching proposition is called the ‘Great Escape’, which is designed to be simple and affordable. For example there is no initiation fee, which can realise a saving of around R6037.50. There is also a negotiated discount of 30% if using an Absa Panel Attorney for bond registration costs, and this is further boosted by Absa covering payment of the remaining attorney bond registration costs up to a maximum of the rebate amounts (VAT inclusive) on loan amounts approved and paid out, as per the following:

Loan Amount Absa Benefit

R500 000 - R2 499 999 - Up to a maximum of R10 000 (incl. of VAT)*

R2 500 000 - R4 499 999 - Up to a maximum of R20 000 (incl. of VAT)*

R4 500 000+ - Up to a maximum of R30 000 (incl. of VAT)*

Absa Transactional account Switching

Switching over your transactional account to Absa comes with other amazing benefits. Ncapai says for example, the Absa Gold and Premium Value Bundles, applied to a transactional account offer free retrenchment and/or disability cover of up to R5000 (Gold) and R10 000 (Premium). Also in play within the bundles is a death benefit of up to R20 000 (Gold) and R25 000 (Premium).

Further, the Absa Gold Value Bundle and Transact Accounts are proven to be the most inexpensive accounts in their categories, as reported in the 2021 Solidarity Report. “These products allow us to claim that currently we offer the lowest banking fees in South Africa, and boosting that further is that from 01 March we have introduced new fees for Everyday banking accounts that overall provides some R500-million in pricing relief to customers though:

While there may be many good reasons to switch banks, many fear the process will be time-consuming and costly. However the majority of banks offer a professional switching service, and which, says Ncapai, should not be burdensome. The bank will act on your instruction to contact your service providers to update your debit order details to your new transactional account. “The only part that could be time-consuming is when the existing service provider does not participate fully in the switching process and you have to contact them on your own.”

Documents required to switch your Home Loan

You may apply online in under 15 minutes to switch your home loan to Absa and even track the status of your application from your smartphone end-to-end. When applying to engage The Absa Great Switch, the following documentation may be uploaded during the online application process:

• A valid, bar-coded South African ID/ Smartcard (both sides) or a passport if not a South African citizen.

• Copy of marriage/divorce certificate if surname in identity document differs to surname on application.

• Latest salary advice (only one payslip required for salaried individuals) unless commission or overtime is consistently earned, or an income statement if self-employed

• Three months bank statements on the personal transactional account into which the salary is deposited.

Once in receipt of the documentation and completed online application, Absa will process and issue approval. A valuation of the property is required, which may take two days. The final quote will go out to the customer. Once the customer has accepted the quote, then the bond registration attorney will be instructed. The customer will pay the remainder of the bond registration fees to allow the bond registration attorney to lodge with the deeds office. Once the bond has been lodged, the customer has successfully switched their Home Loan.

Visit https://www.absa.co.za/switch-to-absa/ to view Absa switching offers.

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