What a difference R100 can make to your mortgage bond

What can you buy for R100 today? Maybe a loaf of bread, a packet of sugar, a sachet of milk, some chicken pieces, a 2.5kg packet of maize meal, a 2kg packet of rice, some tomatoes, some onions, half a dozen eggs, and it’s gone.  And this is enough for only one or two people.

But that R100 can do wonders on your bond. Say you your bond is for R300 000. If you add just R100 a month to your normal repayment, this will reduce your repayment period from 20 years to 18 years and two months and you will save about R37 700 at the current rate of interest of 9 percent.

For a R800 000 bond, an extra R100 a month will reduce your bond payment period by nine months and you will save just over R40 000. On a R1.2 million bond, you will reduce the repayment period by six months and save about R42 000.

These were the average prices of small, medium and large houses, four to five years ago.  A small house is 80-140m2, a medium house 141-220m2 and a large house 221-400m2.

According to the latest ABSA bank housing prices index, the average price of the small house was R833 100 in June. The medium-sized house averaged R1.1 million while the large house stood at R1.8million.

The rand is declining against the United States dollar and will exceed R11inthe next few months. Interest rates will also go up. When interest rates go up, this is means your monthly repayment goes up.

But it you add that R100 onto to the new repayment, you make higher savings. On the R300 000 if interest went up to 9.5 percent, R100 would reduce your repayment period by 23 months and you would save R41 000.

If the interest rate went up to 10 percent and you continued to pay R100 extra, this would still reduce your repayment period by 23 months but you would save R45 000 in interest charges.

You get the gist. If you have a bond or are intending to buy a house, please do something now because higher interests rates will make most houses unaffordable. Higher interests rates mean higher monthly repayments, and higher repayments mean you have to earn more.

My book: How to buy a house for half the price, explains everything from how much bond you qualify for on your present salary to options on how to save without stretching your budget. It is available from Amazon as an eBook for instant download or Kalahari as a hard copy.