How to Pay less for your property and invest in your future

Mortgage FAQ:
Is it better to save R1000 into my home loan to pay it off quicker or to pay it into a high-interest savings account?

Money Saving Tips

In the struggle to become financially free and debt free we are often torn between investing in our future and paying off our existing debts.

A common question among homeowners is whether saving money into their bonds is better than investing in a savings account.

To become financially free and debt free you need to become money wise. Therefore, when you’re deciding whether to invest your extra money into your mortgage or savings account you need to consider the interest rate, the returns and the costs.

The Rate, Returns and Costs

The returns – or interest – you’ll earn on a savings account are generally calculated between 5%-10% annually. That’s between R50-R100 in interest earning per year for every R1 000 you save.

The cost savings you’ll make by investing R1 000 into your bond is much greater than the interest earned on a savings account. The interest charged on your home loan is usually 0.5%-1.5% below the current prime interest rate.

Paying R1 000 extra into a R1mil bond every month would save you about R350 000 over the full term. So you’re actually getting a R350k discount on the what the property cost you over

And, because your property value will grow over the long term, by the time you’ve settled your bond you’ll have a huge asset under your name.

Two Birds, One Stone

Saving money into your bond has a dual effect of paying off your debt while also allowing you to invest in your future.

Got a burning question about your homeloan that needs an answer?
Post your comment or question below or contact a consultant.

3 comments on “How to Pay less for your property and invest in your future”

  1. Hi,

    I am buying a new home and received a 100% loan from the bank. I have R150 000 available. Should I use this money to pay off (R140 000) my car, and then pay the car installment into the bond every month or just pay everything into the bond. I am not planning to buy a new car for at least 3 years.

    Thx

  2. Hi Molly

    Leave the money in your bond account and withdraw it when you have enough, provided you have an access bond. The rate of interest is probably better on your bond than you will get from an investment account.

    Good luck

  3. Hi,

    I need your advise to invest an x amount every month inorder to purchase a car. Should I invest it in my bond account and withdraw when it reaches my target or should I open an invest account. I am looking to save +-R2000pm so i can have a large deposit for my car.

    Thanks

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