Home Loans: 20 year bonds vs 30 years

One of the most frequently asked questions we receive from our clients is whether they should apply for a 20 year bond, or whether they should extend their home loan term up to the maximum of 30 years.

There are number of advantages and disadvantages to each type of bond, but the most obvious benefit is that a 30 year term would equate to a low monthly bond repayment. But this low, more affordable, monthly repayment comes at an expense.

The total interest you’ll end up paying on your 30 year bond will be significantly more .

For example take a look at the table below that compares the monthly repayments and total interest of a R750 000 bond over a 20 years or 30 years.

Bond Amount R750 000
Term: 20 Years
Interest Rate: 8.5%
Repayment: R6 500
Total Interest: R812 000

Bond Amount R750 000
Term: 30 Years
Interest Rate: 8.5%
Repayment: R5 766
Total Interest: R1 326 000

The second benefit to a 30 year term is that you will be able to qualify for a large bond amount. Since the monthly repayment will be lower, the loan amount you can apply for can be larger. Or, if you’ve struggling to meet the affordability for you bond over 20 years, extending the term to 30 years could help to bring your affordability in line with the banks requirements.

The introduction of access bonds, which gives homeowners much more flexibility with regards to managing there home loan, means that you will be able to apply for a 30 year bond while still enjoying the benefits of 20 year home loan.

Speak to our home loan consultants about 20 and 30 year home loans.

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