Many South Africans buying houses and committing themselves to home loans, do so knowing that they are making the most important investment of their lives. What thousands don’t realise, is that responsible management of their bonds can also help them achieve other personal financial goals.
So says Andrew van der Hoven Head of Home Loans at Standard Bank, who points out that savvy consumers can get their home loans working for them. The keys to achieving other financial goals is having surplus balances that have built up in a home loan account and having an Access Bond. By opening an Access Bond facility on a home loan, extra money can be borrowed and used for other purposes.
“An Access Bond is often overlooked as an effective personal financial management tool. It allows the user to obtain surplus funds available in a home loan account as it is needed. Even if the user has no immediate need to access cash, having an access facility in place means that money is always available if an emergency occurs”.
“An Access Bond can be a great financial tool to manage home loan repayments, as money is always available if it is needed. However, even if available money isn’t used, the home owner is in a ‘win-win’ position. The bond will be paid off sooner if the extra money paid in remains in the account.”
For example: If a bond is for R 1 000 000 over a term of 20 years at a rate of 10.5% % interest and a deposit of R 100 000 has been paid, repayments would be R 8985.42 a month. Adding R500 per month you would see the repayment period being reduced to just less than 17 years and R 221, 475.08 being saved in interest costs.
“Most people spend a lifetime paying off a home. It makes sense to do sums, examine all options and then only source a home loan. Using a home loan as an integral part of a personal financial plan as it can enrich the bond holder’s life,” concludes Mr van der Hoven.