Since their house is, for most people, the most substantial investment they will make in their lifetime, it is common to have a 20 year loan repayment plan in order to meet the expenses of having a monthly bond repayment.
According to ooba sales director Craig Deats, most homeowners focus on the monthly or short-term impact a bond repayment will have on their finances, and often forget to calculate the overall amount they will end up paying on their home loans once the payment period is over. Deats also advises homeowners to consider what they can do to reduce the terms and final total of their loan repayments.
Take into account the following tips and you may find yourself debt-free sooner rather than later!
1. When buying a home, put down as large a deposit as possible!
Not only is your finance application more likely to be approved by your bank when you make a sizeable deposit towards the property, a larger deposit reduces your monthly repayment on the loan as well as the overall amount you will have to repay.
2. Negotiate the lowest possible interest rate on your bond.
Even a small reduction in the interest rate on your home loan will significantly lower your monthly repayments, so it may be wise to enlist the help of a mortgage consultant to help you secure a lower rate.
3. Pay in extra every month – no matter how little!
Paying even a small amount of R200 extra into your bond account each month can lower the total amount payable by a considerable amount. Obviously the more you pay, in the more you will save on the total settlement in the long run.
4. Push all extra cash into your repayment.
If your primary goal is to settle your bond account as quickly and as efficiently as possible, a great way to go about it is to pay any extra cash – tax refunds, bonuses, anything – or a portion of the amount into the loan account.
The interest owed on the bond from that point onwards will be significantly lowered by any bulk payments made into the account.
5. Pay your bond as early as possible.
When your finances allow it, you can make the bond payment earlier in the month as interest is calculated daily and you will then save those days’ interest payments. This may seem like a small amount but in the long-term every little bit helps!
6. Use your Bond account to save.
When you are saving up for expensive items, keep the cash in your bond account – if you have an access facility on the account – until you need it. Once you draw the money your balance will obviously go up again, but your interest will have been tempered a bit.
7. Chip away at the interest some more.
Depending on when your salary or other income is paid into your account, consider storing it in your bond account for a few days as this will also wear away at the interest you owe on the loan.
By doing a few simple and straightforward things, a homeowner should be able to reduce the total repayment amount as well as the term of settlement substantially.