20 or 30 Year Bond

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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Interest is calculated daily on the outstanding balance so splitting payments is not a good idea. Go all in on pay day, transfer your entire salary into the home loan then transfer money back to your normal account only when you need it. That's if you have flexi/access bond or whatever your bank calls it.

The interest you pay in February should be less than all other months because of that.
 
Anyone know if I want to take up an offer to switch home loan to FNB, do I first need to notify Nedbank (90 day notice to avoid early cancellation fee) or can FNB build that delay in as part of the switchover process?
 
icarusza said:
Anyone know if I want to take up an offer to switch home loan to FNB, do I first need to notify Nedbank (90 day notice to avoid early cancellation fee) or can FNB build that delay in as part of the switchover process?
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I doubt fnb would take that knock! Apply first and see what rate Fnb gives you
 
icarusza said:
Anyone know if I want to take up an offer to switch home loan to FNB, do I first need to notify Nedbank (90 day notice to avoid early cancellation fee) or can FNB build that delay in as part of the switchover process?
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Use better rate to let current bank match it.

Then you win a better rate and no admin or extra transfer fees
 
djEJ said:
Yes. From what I remember, you essentially need to "buy out" your bond. Usually the first few years of a bond are spent payign the interest (nothing off the capital amount comes off your actual bond).

If you would like to pay it early, you need to make up for all the interest you're missing out on. Rather go for a 20 year bond and pay it off early. The banks must make their money for lending you money. :p
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Quoting an old post here, but surely this isn't correct?

You're not just paying off interest in the first years - it may feel that way because your monthly payment may be R10k and your interest is R9.5k or something, but whether your initial bond term was 10 years or 100 years it doesn't make a difference if you're paying R10k either way. Right?
 
SAguy said:
Quoting an old post here, but surely this isn't correct?

You're not just paying off interest in the first years - it may feel that way because your monthly payment may be R10k and your interest is R9.5k or something, but whether your initial bond term was 10 years or 100 years it doesn't make a difference if you're paying R10k either way. Right?
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Correct it feels that way but capital is absolutely minimal. So small it may as well only be interest essentially
 
SAguy said:
Quoting an old post here, but surely this isn't correct?

You're not just paying off interest in the first years - it may feel that way because your monthly payment may be R10k and your interest is R9.5k or something, but whether your initial bond term was 10 years or 100 years it doesn't make a difference if you're paying R10k either way. Right?
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I stand corrected. According to the National Credit Act and some googling and checking on ABSA and a few other bank's websites:

"You’re Liable for Bond Cancellation
If you pay off your bond early, you’re also liable for bond cancellation fees that could be charged on the additional interest. However, this only applies if you fail to notify your bank 90 days in advance that you’re planning to close your home loan account."

So essentially you could give your 90 days notice and pay interest for those 90 days, then cancel with no penalty. At least that's what it seems like based on what I read.



Also, yes, it feels like you're paying nothing back. For the first few years, if you have a 1 million bond, your bond amount would probably only go down by about 20% if what you pay that year, making it seem like almost nothing.
As an example, if you are paying 10k every month and have in turn paid 120k in the first year, your total amount owing would only go down by 25k.
Essentially, you still owe 975k on the loan when you've paid over 100k on it so far m interest bites you hard...
 
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