20 or 30 Year Bond

RedViking said:
Don't think you can change the interest rate, but by paying in extra you reduce the term, paying less interest over time. I think it was mentioned you can ask the bank to review your interest rate and if you score has improved, they can adjust the interest rate. @zerocool2009

www.ooba.co.za

Extra Bond Payment Calculator | Early Bond Settlement Calculator

An extra bond payment of R250 every month will shorten your bond repayment period by 1.5 years (assuming a rate of 10.25%).
www.ooba.co.za www.ooba.co.za
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Thanks Red.

I was under the impression that the interest charged monthly would come down, since the extra paid brings the base amount down.
 
e4et said:
Thanks Red.

I was under the impression that the interest charged monthly would come down, since the extra paid brings the base amount down.
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No unfortunately that they will have to review as it has more to do than just your bond. It takes your whole profile in account and credit rating.
 
Jehosefat said:
The earlier you transfer the money in the better so your approach is the best one.

In terms of noticing the difference in interest, it's very small on a monthly basis but it adds up massively over the long term.

For example, if your bond has R1m outstanding, paying in an extra R1000 will only decrease your interest by about R6 the following month (7% interest rate). However, on a 20 year, R1m bond at 7%, if you pay R1000 extra in every month, you will pay the bond off in under 16 years and save over R200k on total interest. On the same bond but over 30 years, you knock off almost 10 years and save over R400k.
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Thanks, I'll then just keep doing it the same way.
Just wanted to find out from the forum if there was such a thing for being charged less if you split your additional payments
 
e4et said:
Thanks, I'll then just keep doing it the same way.
Just wanted to find out from the forum if there was such a thing for being charged less if you split your additional payments
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Splitting the payment is a worse approach but over the life of the bond it really doesn't make much of a difference. In the same example as I had above, splitting the extra R1000 into a R500 payment at the beginning of the month and another half way through only results in you paying about R1k - R1.5k more in interest over the term compared to putting the whole R1000 in at the beginning of each month.
 
e4et said:
Thanks, I'll then just keep doing it the same way.
Just wanted to find out from the forum if there was such a thing for being charged less if you split your additional payments
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every extra cent I have lives in my bond.

I buy on CC settle same month the rest goes straight into the flexi knocked years/millions of the bond this way.

I just pull money out as needed
 
Snyper564 said:
every extra cent I have lives in my bond.

I buy on CC settle same month the rest goes straight into the flexi knocked years/millions of the bond this way.

I just pull money out as needed
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Pretty much what I do. Put as much as I can into the bond and if I need it later I take it out. But that’s only in emergencies or such.

Trying to have the bond paid off in 5yrs.
 
e4et said:
Thanks Red.

I was under the impression that the interest charged monthly would come down, since the extra paid brings the base amount down.
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It does. Make a spreadsheet and start logging the interest paid and amount of days

It snowballs in time
 
I didn't know banks still offer 30 year bonds. Do banks still offer 30 year bonds?

Man, 30 years is a long time to repay a loan, though...
 
ToxicBunny said:
I've gone the route of taking a 30 year bond, but will be paying it off in 15 years...

It just gives me a bit of wiggle room if things go a bit pear shaped.
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How's that working out. You should be 3 years away from paying it off now :)
 
If you are considering a 30yr bond to save money, you can't afford the house you're trying to buy.

Also, with interest rates increasing, fewer people will be buying. If you can hold off for a while, you might get a better deal towards year end.
 
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PseuDohNom said:
If you are considering a 30yr bond to save money, you can't afford the house you're trying to buy.
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I don't necessarily know if it's that simple. If your only option is a 30 year bond it's too expensive for you. As a cash flow/risk reducing tool, it can be useful. Haven't bought a car on credit for while now but the last two or three times I did, the interest rate was less on a 72 month loan vs a 60 month loan. Haven't done the same comparison for a bond but if that holds true, you could save a boat load by taking the 30 year loan and then repaying it as a 20 year loan.

One also has to ask the question, will South Africa even exist as we know it in 20 years? A 30 year loan could be preferable if the answer is no. Let's say you believe SA f**** out in the next 10 years, a 30 year loan could improve your cash flow for for your plan B scenario. With 8-10% rental increases, even paying the interest makes sense in this case.
 
e4et said:
Hey guys,
Are there any "tricks" to lessen the interest paid each month ?

I pay extra into the bond each month, but I don't really notice the interest charged changing from month to month, apart from now, since the interest rates have gone up this year.

I read that some suggest making your additional payments twice a month, on the 15'th and again at the end of the month, but not sure if this applies to us that much.
I usually just transfer whatever extra I can afford right after payday.
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You will only see a shorter time until your bond is paid off if you pay in more per month. Your per-month payment will not change.
 
hj2k_x said:
How's that working out. You should be 3 years away from paying it off now :)
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I was well on my way to actually paying it off in the next 3 years, then Covid hit, and I did some renovations and such like things that I hadn't planned for.... so back out to about 7 or 8 years from now
 
hj2k_x said:
I didn't know banks still offer 30 year bonds. Do banks still offer 30 year bonds?

Man, 30 years is a long time to repay a loan, though...
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Banks actually default to 30 year bonds atm from what I can see (if you're young enough that is)..
 
e4et said:
Just wanted to find out from the forum if there was such a thing for being charged less if you split your additional payments
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There's not much you can do except pay early. The more the better. You're charged interest daily on the outstanding balance.
 
30 year option is a no brainer of you have discipline. I have a 20 year bond, with access. So pay up the bond, then buy the next thing, in my case, a second property, and pay for it cash. Rinse and repeat.

The interest is still tax deductible if you can prove to SARS how the loan is created.

If you not disciplined, don't bother.
 
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