select
|

MONEY MATTERS

A small increase on a homeowner’s monthly bond repayment can make a big difference in the amount of time it takes to pay off the bond, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
 
“On a 20 year bond of R500 000 at an interest of 11%, the monthly bond repayment will be in the region of R5160. If the homeowner pays just R300 extra into their bond every month, they will save over R144 000 and cut the term of their bond by almost four years,” says Goslett. “This may just be a small step, but it can fast-track a homeowners path to financial freedom.”
 
Goslett adds that if a homeowner is financially stretched to the limit and is not in a position to pay additional money into their bond, they could rather focus on finding ways to reduce the interest payable over the term of the bond. In some cases switching from one financial institution to another can result in a reduction in interest rate. He notes that on a bond of R1 million, a reduction of as little as 0.5% on the interest rate can result in a saving of over R76 000 over the term of a 20 year home loan. “However,” says Goslett, “homeowners that do consider this option could face paying bond cancellation and penalty fees, which will severely reduce any benefit or profit achieved from obtaining the lower rate.”
 
According to Goslett, even if a homeowner is able to obtain a lower interest rate through switching banks or a general interest rate cut, they should still keep their monthly repayments at the same amount. Banks will usually reduce monthly payments automatically according to the prime interest rates fluctuation, however, homeowners can have the repayment stabilised.  Maintaining the original bond repayment at the reduced interest rate will mean that they are getting the benefit of paying extra into their home loan every month, without having to find additional money in the budget.
 
Goslett says that homeowners can make further savings on their home loan interest if they have an access bond where they can transfer any extra lump sums of money into the loan account, such as an annual bonus, refund from SARS or a portion of their salary, while still retaining access to it. The interest payable on the home loan account is calculated daily based on the outstanding balance. This means that if a homeowner has access to the account and is able to transfer cash into the account when they have it, they can reduce the amount of daily interest charged for the period that they money is in the account.  This is a good solution as even if the money is only in the account for a short while until the homeowner requires it and needs to withdraw it again, the interest over that period will still be less. “The savings on the daily interest amount might seem small, but it will add up over the term of the loan,” says Goslett.
 
Finding ways to pay off a home loan faster or reducing the amount of interest paid over the term of the loan, can be massive steps towards realising a greater return on the investment made. “Even in tough financial times when budgets are tight, homeowners can still make significant savings with relatively insignificant changes to their monthly budget. By proactively using simple saving strategies, homeowners can effectively speed up their journey to financial freedom,” Goslett concludes.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
    • 21 Nov 2017
      As more and more South Africans look to invest in property abroad, Spain is offering them one of the best deals in global real estate.
    • 20 Nov 2017
      Since 2012, sectional title complexes have been leading the South African property market, not only in terms of price growth, but sales volumes as well. Remaining relatively strong, even in the face of 2017’s political and economic turmoil, experts say this market segment could offer valuable insight into South Africans’ property purchase priorities.
    • 20 Nov 2017
      Regardless of whether you are purchasing your first start-up home, downsizing or moving in with roommates, finding ways to maximise small spaces can be a big advantage, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK