FINANCE
5 things to use to unlock maximum benefit from your bond
1 . Early and split repayments for lower interest
The earlier in the month you pay your bond , the less interest you will accumulate . This can help you shave years off your bond repayment over the loan repayment period . Another trick to save interest is to split your monthly bond instalment .
So , if your bond repayment is R8 000 , arrange with the bank to deduct R4 000 on the last day of the month and the balance on the 15th . The full amount will be paid within a 30-day period , but the interest – which is calculated on a daily basis – will be reduced .
2 . Recognition and Appreciation
If you can pay more than the required monthly instalment on your bond , you take years off your bond repayment period . Also , by paying off the balance sooner , you will reduce your interest over the loan repayment period .
On a R2 million bond , at a prime lending rate of 11.75 %, a payment of R1 000 extra each month will save R564 586 in interest over the loan period , which will also be shortened by three years from 20 years to 205 months .
It may seem daunting at first , but with expert advice and some insider knowledge , you can navigate the property investment journey knowing that you are making an informed decision .
3 . Benefits of keeping your bond open
Don ’ t cancel your bond once you have paid the full amount . If you keep the bond open , it will still be possible to access funds if needed . Any amount you pay over and above your instalment lies in an access facility and this can be accessed at a later stage .
Many homeowners use their primary residence to access funds so that they can buy their second property . There is no real benefit in cancelling your bond , unless you are selling the property , or you are absolutely sure that you will not be needing to access funds again . The bank will keep your account open unless instructed otherwise .
60 REI MAGAZINE AUGUST