THE money TIP

CityPress - - Business -

If you owe a lot of money on your home, you may think that pay­ing a lit­tle bit ex­tra into your mort­gage will make scant dif­fer­ence. How­ever, Sim­phiwe Madik­izela, head of spe­cial projects at FNB Hous­ing Fi­nance, says that many peo­ple don’t re­alise that even pay­ing as lit­tle as R50 ex­tra into your bond will af­fect the in­ter­est you pay.

By pay­ing an ex­tra R50 on a R500 000 home loan on a 10.25% in­ter­est rate for 20 years, you will be able to pay off your home loan in 19 years and three months – sav­ing more than R26 111.86 in in­ter­est that you would have paid to the bank.

“You should also con­sider top­ping up your ex­tra pay­ments with a lump sum, ei­ther from a salary bonus, a tax re­fund or other fi­nan­cial wind­fall. This will sig­nif­i­cantly re­duce your in­ter­est over the loan pe­riod,” Madik­izela says.

“Be­ing aware of the ef­fect of mak­ing ex­tra pay­ments will help you man­age your bond re­pay­ments and, ul­ti­mately, en­sure that you pay off your bond as quickly as pos­si­ble.”

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