OTHER ADVANTAGES OF UTILISING YOUR HOMELOAN AS A SAVINGS ACCOUNT

You will have seen from the examples above that you can save thousands of Rands and settle your bond years earlier by applying all or some or these methods. The maximum benefit will be gained by applying as many methods as possible in combination, making the additional payments into the bond as large as possible, and leaving the money in the bond for as long as possible.

By applying these methods, you will also create some other significant advantages for yourself:

• You will build up a reserve of funds in the bond account which you can access in an emergency;
• If interest rates increase, it will not impact you if you’ve already gotten used to paying more in, or if not (but you were using some of the other methods), you would have built up a reserve which will provide you with a cushion should you not be able to afford the higher repayments.
• You can utilise the surplus funds to buy things which you would otherwise need to buy using instalment sale or credit card debt, thereby gaining the benefit of the lower interest rate on the bond. If you do this, you should increase your bond instalments to cover the new purchase. For example

Cost of new lounge suite: R20 000

Instalment @ 25% over 60 months (approx): R587

Instalment @ 15% over 60 months (approx): R475 (R112 saving per month)

Bond instalment: R6 584

New bond instalment (for next 60 months): R7 059

By paying R4660 per month, you will pay off the lounge suite in 60 months, and get the benefit of the lower interest rate. You could, of course, decide to pay the full instalment of R587 (total bond payment of R4761 per month), in which case you would pay for the lounge suite within 46 months!

This document is not intended to be an exhaustive list of ways to reduce your bond term, but hopefully it enables you to see that by simply managing your money in a more efficient manner, your bond can be settled years before it is due, resulting in thousands of Rands being saved. Please do go back and read some of the ealier articles in our archives. It takes a few reads before one really gets motivated into action.