Smart trick to help you pay off your mortgage sooner
Did you know that splitting your mortgage payments can save you a lot of interest and in turn help you pay off your property sooner?
Many South Africans still depend on bank loans to be able to afford to purchase a property.
Getting approval from the bank to buy property using a loan can be great news, especially if you are a first-time home buyer.
However, the problem with buying property on credit is you will end up paying a lot of money in the long run.
The bank will usually give you twenty to thirty years to repay the loan amount. If you stick to paying the set amount from the bank, you might find that at the end of the period, you paid double the loan amount or even more, depending on the interest rate.
If you want to pay off your mortgage quicker, one of the tricks is to split your bond payments.
There are several ways to do this. When getting your bond, you need to arrange with your bank to split the monthly installment. For instance, if your bond repayment is R5, 000, you can ask the bank to deduct R2, 500 on the last day of the month and the other R2, 500 on the 15th. Within thirty days, you would have still paid the bank R5000. Some people even split the payments into four - paying the bank every week.
READ: Is it right to move in with your partner but refuse to pay towards their mortgage?
Why split payments?
When you split your bond payments, it reduces interest. This is because the interest on your bond is calculated on a daily basis.
So not only are you cutting down on interest, but you would reduce the number of years of paying your property.
You can also choose to pay extra on your bond account.
When you pay extra on your home loan account, the bank can allow you as the client to access the additional funds during the term of the loan if required. This might be better than taking out a personal loan or credit card due to the interest rate.
Although you access that money, it won't affect your loan agreement interest rate.
READ: Are you paying too much for your levies? Here is what you can do about it
More from Jacaranda FM
Image courtesy of iStock/ @ArLawKa AungTun