Flexi Option on FNB Homeloan

[Ecco]

Anybody has the flexi option on their FNB Homeloan?

If you do, do you mind explaining how it works? I read the details on the website but still unsure.

This is what I understand: You transfer funds to the mortgage account (this is in addition to your monthly repayment) and these fund are then used to reduce the interest you pay on the loan. You can also access these funds at anytime with no cost - obviously resulting in a different interest calculation after taking the money out.

How much am I actually saving like this vs restructuring after making a big-ish payment lets say R20k?

 

[JungleBoy]

Anybody has the flexi option on their FNB Homeloan?

If you do, do you mind explaining how it works? I read the details on the website but still unsure.

This is what I understand: You transfer funds to the mortgage account (this is in addition to your monthly repayment) and these fund are then used to reduce the interest you pay on the loan. You can also access these funds at anytime with no cost - obviously resulting in a different interest calculation after taking the money out.

How much am I actually saving like this vs restructuring after making a big-ish payment lets say R20k?

Even if you don't deposit any extra cash your capital part of your monthly instalment is added to your flexi funds available. When your bond is paid up all the capital amount will be in the flexi account, available for you to use like a big credit card

AFAIK interest is always calculated on the outstanding balance. So it should make no difference which ever way you cut it.

 

[Ecco]

Even if you don't deposit any extra cash your capital part of your monthly instalment is added to your flexi funds available. When your bond is paid up all the capital amount will be in the flexi account, available for you to use like a big credit card

AFAIK interest is always calculated on the outstanding balance. So it should make no difference which ever way you cut it.

So you saying that all my repayments and additional payments go into the flexi account for use whenever i choose right up to the last day?

 

[Ecco]

Will the monthly repayment amount change after making an additional payment?

 

[JungleBoy]

So you saying that all my repayments and additional payments go into the flexi account for use whenever i choose right up to the last day?

Yep - that's how it works with FNB flexi. I have another bond with Nedbank and only extra payments are paid into the flexi account

 

[JungleBoy]

Will the monthly repayment amount change after making an additional payment?

Yep they will reduce unless you implicitly instruct the bank to keep them the same. That way you will payoff your bond quicker.

 

[Tinuva]

Yep they will reduce unless you implicitly instruct the bank to keep them the same. That way you will payoff your bond quicker.

I don't remember giving such an instruction, my monthly repayment amount stays the same, yet I pay extra in every month. The interest charged each month at least goes down.

 

[Ecco]

So effectively by depositing or withdrawing money from this account I am only impacting the interest I pay per month. Surely the term of the loan would be impacted?

 

[Waaib]

I have a FNB bond with Flexi facility.
When I pay in extra the monthly payment reduces the following month. Sometimes it's too small to notice but I recently took a detailed look and they do decrease when I pay in extra.
To use the funds I just transfer what I need to my cheque account and use them there. The monthly bond payment then increases.

My understanding is that interest is calculated in advance when you open the bond account so by having extra in the account it reduces the interest required to be paid. The capital paid each month doesn't change which is why the term doesn't change.

You can ask FNB to 'capitalize' the extra funds. Which means they'll take your extra funds and reduce your original loan by the amount you instruct them to. Then you won't have access to use the funds anymore but total interest will reduce so your monthly amount payable will also reduce.

From what I understood when I talked to FNB about this you can, in theory, also ask them to reduce the term but the lady I spoke to said she's never seen that happen. She said this is because if you pay the bond of more quickly than planned you just close the account and you're not charged any extra interest (because it's re-calculated daily) or penalty so reducing the term has no material effect.

Interest is calculated daily because they need to account for things like extra payments and changes to repo rate.