THE money TIP
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.”