Your commitment to your home loan is one that will most likely span over a minimum of 20 years. Managing your monthly bond repayments well (and to your own benefit) requires careful budgeting, as well as large doses of discipline.
"While making your scheduled home loan repayments will work, it is in your best interest to repay your bond ahead of schedule," says CEO of Greeff Christie's International Real Estate Mike Greeff. He says implementing steps to do so could shave a few years off your bond, as well as save you the added interest.
Make use of the following tips on how to achieve this:
1. Pay extra into your bond account every month
Practise this from the start to ensure you get used to this way of doing things. If it is within your means, pay between a few hundred rands and a thousand more with each monthly payment to lessen the owed amount accordingly.
Following this step may be difficult at first, but working diligently with your earnings will benefit you in the long run.
2. Pay large lump sums here and there
Do your best to pay lump sums into your home loan as and when possible. Paying a few extra thousands into your bond when possible can shave off your repayment amount a little at a time, and doing this two or three times a year will be sure to make a difference.
3. Set a target date to pay off your bond by
This may be in 15 years as opposed to 20. It could be by your 40th birthday, when a child finishes high school, or even a retirement date. Set a date of when you'd like your property to be paid off, calculate how much you will need to pay monthly to achieve this, and adhere to that date as much as possible. Even if you are out by a few months, paying off your bond early will still make a considerable difference.
4. Put annual bonuses and tax rebates toward your bond repayments
Annual 'cashbacks' into your account are always a welcome gift, and can be used toward your home loan repayment as an additional influx of cash, thus lessening your repayment. As they are mostly unexpected, they won't necessarily interfere with the amount allotted to this payment beforehand. A lump-sum cash injection into your bond could be the perfect way to spend your year-end bonus or that investment that just matured.
5. Make your bond repayment earlier in the month
As interest rates are calculated daily, do your best to make your payment earlier in the month to have your interest calculated at a consistent amount, leaving less variables to chance. Doing so will also help you get into a consistent routine.