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HomeCompany NewsThe one property investment goal to set for 2018

The one property investment goal to set for 2018

Investing in your bond will save you hundreds of thousands of rands in the long term – and see you smiling all the way to the bank.

We’re well into the new year well, and with resolutions likely to already be falling by the wayside, there’s one promise every homeowner should commit to upholding this year – and that is paying off your bond faster.

Since interest on a home loan is charged daily, every single extra cent – no matter how small – that you pump into your bond will bring you financial relief in the long run.

Paying as little as R100 extra on your bond repayment instantly shaves at least a year off the full term of your home loan and, interest rate dependent, could save you just under R50 000 in interest charges.

“At this time of year, many people are making plans to get better control of their finances and to save money for their children’s university education or their own retirement, but the truth is that if you’re a homeowner and you have some surplus cash each month, the very best investment you can make is in your existing bond,” advises Rudi Botha, CEO of bond originator BetterBond.

“The reason for this is that the amount of interest you will save on your home loan will, in the long term, far outweigh the returns you could hope to make by choosing seemingly more exciting or adventurous investment avenues.”

With the latest data indicating that the average price of a house in SA stands at around R1.13-million and assuming that the average person puts down a 20% deposit on a 20-year loan at the prime lending rate of 10,25%, your minimum bond repayment would be just less than R8 900.

By sticking to the minimum payment a homeowner winds up paying close to R1.3-million in interest over the course of the loan – because of compound interest.

Botha says paying just 10% extra on your bond means that you’ll effectively pay only R892 000 in interest compared to R1,3-million.

“A homeowner will save about R480 000 worth of interest, representing an excellent and tax-free return on the total additional ‘investment’ of R166 000 in their home loan. And of course the value of the property itself will be growing at the same time and your equity will be mounting quickly to provide a solid foundation on which to build wealth and meet your family’s future needs,” he says.

“What’s more, an investment in property is relatively risk-free, which is a very valid concern for consumers at this time, when the value of even blue-chip shares that seemed like a ‘sure bet’ can be wiped out within hours.”

View the table below to understand the full impact of paying a little extra on your bond. Note: This example is based on a home loan of R500 000 at an interest rate of 10,25% over 20 years.

For more property investment insight, visit www.propertybuyershow.com.

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