Owning it


Why pay more into your bond? Why not!

Why pay more into your bond? Why not!

In this article:

Financially savvy homeowners use their bond to their best advantage. Adding a little extra to your home loan repayments every month would mean paying less interest over time, and could cut down the term of your home loan by months or even years. Many homeowners don't realise what a big difference a small amount could make. The financial benefit that you can derive from this is even greater in an environment of low interest rates like we have seen in South Africa in 2020, 2021 and into 2022.

How it works

Raising your monthly payments by even a small amount can result in a big overall saving. Let's look at a practical example. For much of 2020 and nearly all of 2021, the prime interest rate was at 7%. Apply this to a property costing R1 million over the typical term of most home loans, which is 20 years, then your bond repayments would be R7 753 per month. In total, you would end up paying R1 860 717 for that property. If you could find R650 a month more to put into your home loan it could make a huge difference to your financial future. This might sound like quite a bit of money, but think about it this way... if you buy a few cups of coffee less per month, skip one or two online sales, or not grab that pair of sneakers off the shelf quite so quickly, it becomes totally doable! Take a look at what you stand to gain in exchange for these comparatively small sacrifices... A simple example would look like this: On a R1 million bond at a prime interest rate of 7% over a 20-year period you'll end up paying a total of R1 860 717 at the end of your home loan term. However, if you increase your monthly bond repayment by R650 to R8 403 per month, you would not only pay your loan off in 17 years instead of 20, but also end up with a much lower total amount of R1 711 720, meaning you'll shave off three years and R148 998 in interest. That's very nearly R150 000... just imagine what you could do with that money!

How much you can gain

Our example gives you an idea of the impact that paying a little extra into your bond could have, but it's worth calculating the real savings you could be in for, by using your actual bond figures. Find out in seconds how much time and money you could save, with the help of our Additional Payment Calculator - the more info you provide, the more accurate the calculation will be.

How to make it happen

If you're scratching your head and wondering how you could possibly get this done, here are two strategies to consider. Start by going over your monthly budget with a fine-tooth comb to see if there's anywhere you can cut down or save. Secondly, always be on the lookout for any lumpsums that could go into your bond - like an annual bonus or a tax refund - because adding a little to your monthly repayments isn't the only way to do it. The trick is to make the mind shift to putting every little bit extra into your bond that you possibly can, and you'd be amazed at how fast you can bring down the capital owed, especially at a time when interest rates are low!

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