Add a little extra on bond repayments
JOBURG – Adding a little extra towards bond repayment can save homeowners hundreds of rands.
Homeowners who add a little extra towards their bond repayments each month stand to save hundreds of rands in the interest charges and years off their loan term.
The regional director and CEO of Remax of Southern Africa, Adrian Goslett, noted that expenses tend to increase this time of the year as people stock up on gifts and increase entertainment spending.
“Instead of getting carried away with elaborate presents or big holiday plans, why not give yourself the gift of greater financial freedom by adding a little extra towards your home loan each month? Not only will this save you greatly on interest charges and reduce your loan term, but it will also help you prepare for any upcoming interest rate hikes which may occur in the year ahead,” he explained.
To give homeowners an idea of what they stand to save, South Africa’s leading bond originator, BetterBond, provides an example.
By paying just R1 000 extra each month on a 20-year bond for a R1-million home, at the current prime lending rate of 7.25%, it’s possible to save about R219 000 in interest and reduce the loan repayment period by four years.
If this does not sound convincing enough, Goslett encouraged homeowners to think about what they could do with that R219 000 savings. “At the cost of putting an extra R1 000 per month towards your home loan, you could have saved enough on interest charges to put one child through a year of private schooling or to have paid for a four-year university degree,” said Goslett.
Practising some financial discipline now will also help homeowners adapt their budgets ahead of any further interest rate hikes. “Interest rates will not go back to double digits overnight. However, it is likely that we will see one or two more hikes over the course of 2022. Having the foresight to budget for this now will save homeowners the heartache of falling behind on repayments later.”
“If the pandemic has taught us anything, it is to be prepared for the unexpected to build up enough equity to last through tough financial seasons.”
