The true meaning of a flexible rate bond
Since you probably don’t have hundreds of thousands of rands lying around, a bond is a loan that enables you to cover the cost of a home. You pay back the loan over the course of years or even decades. It may just be the biggest, longest; most life-changing loan you’ll ever take.
But of course if you’re a newbie home buyer and you need to get a home loan there’s a much wider variety of options to find a loan that’s right for you. Let’s help you identify the different rates by delving deeper into the true meaning of a flexible rate bond.
A bond is a residential loan agreement between the soon to be owner of a home a bank or building society who lends money at interest in exchange for taking title of the debtor’s property. Through the legal agreement the owner of the home is obligated to pay a specified amount of money at specified future dates. And since the bond is a loan used to purchase a home, the property serves as the borrower’s collateral, with the condition that the conveyance of title becomes void upon the payment of the debt.
And when it comes to interest lenders don’t just loan you the money because they’re good guys. They stand to make money off you, too, since you pay them back plus interest of the percentage of the money you borrow.
Therefore when it comes to a flexible rate also commonly referred to as an adjustable-rate bond or a floating-rate bond or even a variable-rate bond in terms of a bond. Is a loan in which the rate of interest is subject to change, and when such a change occurs, the monthly payment is adjusted to reflect the new interest rate.
These mortgages start with a lower interest rate for the first few years, and then they’ll adjust after a predetermined period (typically five years) based on market indexes. Borrowers enjoy the initial lower payments, but this type of loan can feel risky if interest rates rise a lot. However, there’s a cap that can prevent too much damage.