Real Estate Investor Magazine South Africa November 2015 | Page 21

strong and healthy, as these are factors the banks
consider when deciding on the interest rate they will
offer you on a home loan.
The term of the loan also has a huge impact on the
total repayment. Consider the two scenarios below,
comparing a 20-year loan term to a 30-year loan term
Scenario 1 – 20-year term
Home Loan Amount - R500 000
Home Loan Term – 20 years
Interest Rate – 9.5%
Monthly Repayment – R4 661
Total Repayment - R1 118 557
Scenario 2 – 30-year term
Home Loan Amount – R500 000
Home Loan Term – 30 years
Interest Rate – 9.5%
Monthly Repayment – R4 204
Total Repayment – R1 513 538
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Over 20 years the total amount in interest payable is
R618 557. If you stretch your R500 000 bond term
over a 30 year period, with the same prime interest rate,
you will end up paying R1 013 537 in interest – more
than double the capital of R500 000 initially borrowed.
It therefore makes sense to keep the repayment term
as short as possible. Consider, for example, that when
you buy a car on credit, the repayments are usually
st