Interest rate. The cost to borrow money, and the amount you earn on money invested. It’s one of the things that often falls to a secondary, if at all thought, when getting a home loan approved. You think to yourself, so long as we get it approved, that’s all that matters, and we can deal with the rest later. Inevitably, you never do.
But did you know that with the assistance of a skilled bond consultant, like the team at Bond Spark, the interest rate on the loan you get can make more than a little difference in your life, from day 1? And did you know, it could mean saving thousands of Rands over the course of your loan term?
Here are some numbers that prove the point and after, we’ll show you how managing your home loan smartly can act like having money in an interest-earning investment.
Looking at the numbers
Let’s say you have a R1 million bond approved. At the current prime lending rate of 10.5%, the repayments work out to approximately R9 983 per month.
By submitting your application to multiple banks and negotiating on your behalf, let’s say your expert consultant gets you 1 percent less, 9.5% per annum. Your loan repayment is now R9 321 per month – a whopping R663 less per month, or R7 956 less per year!
We don’t need to tell you all the things you could buy with almost R8000 extra a year. But let’s go a little further.
Let’s say, you had already resolved to paying the R9 983 per month and you choose to instead of saving on the repayment you put the extra back into the bond. Firstly, your “invested” money into the bond saves you 9.5% per annum in interest that you’d have to pay. R663 per month, or R7 956, will have resulted in a benefit of R8 337 – R381 for free (interest saved).
But let’s see how that plays out over a 20-year loan term. By paying just the SAVING from a 1% interest rate change, the R663 per month, the total loan amount (including interest) on R1 000 000 is reduced by R243 238, and your loan term is reduced to just under 16 years, 8 months (or 3 years and 2 months earlier!).
The bottom line
The long-term effect of small, repetitive additional payments in compound interest calculations are powerful over time. With facilities such as access bonds, surplus income can be deposited there and re-accessed later if needed.
Working with a bond originator like Bond Spark who has YOUR interests at heart, whose goal is to secure the best interest rate possible as well as the loan with the most favourable terms, not just getting approval to fulfil the obligations of a sale agreement, can be a decision that future you will certainly thank you for.
For advice and guidance like this before or during a home-buying process, be sure to get in touch with one of their friendly and knowledgeable consultants.
Get pre-qualified or apply for a home loan today, it’s 100% free.
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