Save thousands on your bond

Despite the recent rate hikes, South Africans have enjoyed a low interest rate environment over the last few years. With such low rates, paying extra money into your bond may not have been quite as high a priority as it was when interest rates touched on 25 percent a few years ago.

However, with the recent 0.5 percent interest rate increase, and more certain to follow, Jack Trevena, MD of homeloan originator BondExcel and ex-CEO of Nedbank Homeloans, suggests that there are a few ways to save thousands on your bond.

"The simple maxim 'pay more, save more' still applies, even at today’s interest rates," says Trevena. "Paying just R100 more on a R300 000 homeloan per month shortens the 20 year period by two years and saves you R47 188 in total. R500 extra per month saves you R159 111 and shortens the period to 13,3 years!

"When interest rates drop, or if you renegotiate a better rate, keep your repayments at the same level to which you have become accustomed. That way you accelerate your payments and save, without impacting your current budget. These extra deposits into your homeloan, whether monthly or lump sum, also yield interest savings tax free."

Internet banking is a must for serious property owners. "Get connected," says Trevena. "This allows you immediate access to your funds and you can move spare cash into your homeloan account for short periods of time. You will be amazed how much you save in the long-term. Your cheque account is not for savings but only for transactions and banks enjoy 'lazy' money that just lies there! Move this money into your homeloan account where it can work for you."

Be sure, however, to check your homeloan provider’s policy on cash handling fees, which can be expensive. Find out if your bank charges cash handling fees on cash deposits into your bond. If not, deposit cash into the bond and, when needed, transfer the cash back into your current account overnight using the internet.

Another money saving tip is to stay liquid. Put extra money into the bond as fast as you can, but always retain access to it. Set up your access facility when you negotiate the bond or renegotiate your bond to have this facility included.

"Always pay by debit order," advises Trevena. "In addition to the convenience, you also avoid fees for late payments. There could also be other benefits, for example, First National Bank offers you eBucks for paying by debit order.

"Also, be proactive in managing your homeloan. Contact your homeloan provider and renegotiate the rate you are paying. Find out what about the new homeloan products and services the homeloan provider offers that could make a positive experience to your home ownership"

(Property24 - Friday 04 Aug 2006)