Why pay more into your bond? Why not!

Financially savvy homeowners use their bond to their best advantage. Adding a little extra to your home loan repayments every month will mean paying less interest over time and cutting 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.

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.

If, for example, the prime interest rate is 7%. 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 may sound like quite a bit of money, but think about it this way ... if you buy a few cups of coffee less per month and skip one or two online sales, 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 will not only pay your loan off in 17 years instead of 20, but you will also end up with a much lower total amount of R1,711,720. This means you'll shave off three years and R148,998 in interest. That's very nearly R150,000!

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 lump sums 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. You'll amazed at how fast you can bring down the capital owed!