An additional R1 000 payment a month on a bond of R1 million at the current prime lending rate of 10.5% will reduce the term of the loan by almost five years, according to Adrian Goslett, regional director and CEO of property agency RE/MAX.
“That is a 25% reduction in the term of the loan for a monthly repayment that is 10% higher. By paying extra into the bond and reducing the term of the loan, homeowners will be able to decrease the overall interest amount they pay. The money saved can be put towards retirement or perhaps a child’s education,” he says.
This month, homeowners breathed a sigh of relief as Reserve Bank governor Lesetja Kganyago announced that the repo rate would remain unchanged at 7%, meaning that the prime lending rate would stay at 10.5%. This was good news as we head into another year of predicted slow growth.