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Your bond can be good debt!

When the bank advances one money to buy a property, one would consider the debt to be good debt. The property is after all an asset escalating in value, and one has to pay for a roof over your head  - so much better if the monthly cost help build your wealth.

How one manages this debt determines what it ultimaltey costs.

To reduce the cost of the debt and save money, consider this:

  • Every month, pay more than required. Consider eating out less and pay an additional R100 or R200 into the bond. Or stop smoking and put the money your save in this way into the bond every month. Resist buying that new car and pay the amount you would have paid on the car into your bond. Doing this will reduce the repayment period with months, if not years, and will save your thousands of rands on interest. Have a look at your budget and play around with the caculator on our webpage. It is amazing to see how far a little extra can go!
  • Make your first payment early, and make payment a day or two earlier than required every month. This will also reduce the  payment period and will save you a lot on interest. 
  • When you have some extra money, like a bonus, resist splashing all and put some into your bond.
  • Use your bond account as a savings account when you save for a special holiday or new car. If you were to put R10 000 in a typical savings account at the bank, the most interest you can expect to get is 5% at a push. A capital payment of this amount into the bond will save you effective interest equal to the interest rate on you bond - around 9% at the moment. Most banks will allow you to withdraw extra funds you have deposited into your account at any stage.

A small adjustment to your lifestyle, together with a bit of discipline, can save you thousands of rands in the long run!

 

 


Published in: August News

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