FNB access bond and overpayments

ChristelleH said:
Hi there,
I came accross this website and chat specifically while I was trying to get answers on the FNB Flexi account. Seems like you have a good idea so kindly see if you can answer the below?

As mentioned, I have an existing FNB Flexi bond. I am thinking of transferring x-amount into the bond, to allow for my repayment to go down. Which it should. However, if I paid for example, R100k into the flexi, repayment goes down slightly, will my R100k stay R100k for as long as I dont withdraw it again? Meaning, does FNB charge interest on the amount in my Flexi account. So in the long run, the R100k will be R0? If that is the case, how much do they charge/deduct then on the "available R100k"?

Hope I am making sense?

Thanks.
Click to expand...

Firstly, when you add extra funds to your FNB Flexi bond account it does NOT decrease your monthly payments. What it will do is decrease the amount of interest you pay, which then increases the amount of capital you are repaying back. What is happening is that FNB gives you an interest rebate (essentially paying you tax-free interest) by way of decreasing the overall amount of interest you pay by taking into consideration the overpayment. That interest rebate is then added to your available funds so you will see after initially paying R100k you will slowly see the available amount creaping upwards every month as you earn more and more rebate interest on your overpayments.
 
ChristelleH said:
Hi there,
I came accross this website and chat specifically while I was trying to get answers on the FNB Flexi account. Seems like you have a good idea so kindly see if you can answer the below?

As mentioned, I have an existing FNB Flexi bond. I am thinking of transferring x-amount into the bond, to allow for my repayment to go down. Which it should. However, if I paid for example, R100k into the flexi, repayment goes down slightly, will my R100k stay R100k for as long as I dont withdraw it again? Meaning, does FNB charge interest on the amount in my Flexi account. So in the long run, the R100k will be R0? If that is the case, how much do they charge/deduct then on the "available R100k"?

Hope I am making sense?

Thanks.
Click to expand...

You get charged interest on the amount you owe, as on outstanding

Your debit order would remain the same, if interest rates dont change

What do you mean, the prepaid would be R0?
 
Okay, so If I transfer R700k into my bond, my repayment wont go down?
What I meant is, if I pay R700k into my bond (the flexi account), it will then show R700k available?
 
ChristelleH said:
Okay, so If I transfer R700k into my bond, my repayment wont go down?
What I meant is, if I pay R700k into my bond (the flexi account), it will then show R700k available?
Click to expand...

Yes, not only will R700k be available, but the available amount will increase every month by the amount of rebate interest that amount has earned so it will slowly increase every month. You can transfer that amount out of the bond account anytime you want to as along as you're not in arrears.
 
Okay, thanks for that. Only thing I dont understand now thou is, if Im paying R700k on my bond, why is my repayment per month not going down?
Because then my total owe decreases by R700k?
 
ChristelleH said:
Okay, thanks for that. Only thing I dont understand now thou is, if Im paying R700k on my bond, why is my repayment per month not going down?
Because then my total owe decreases by R700k?
Click to expand...

Because by paying the same amount every month you will effectively decrease the time that it will take to pay off the bond. You can request them to capitalise the overpayment (and thus reduce the monthly payment) but then you will no longer have access to that R700k.
 
ChristelleH said:
Okay, thanks for that. Only thing I dont understand now thou is, if Im paying R700k on my bond, why is my repayment per month not going down?
Because then my total owe decreases by R700k?
Click to expand...
Mine doesnt go down either
But I am paying it off quicker
So in the end you save lots of interest
 
Standard Bank does not work the way as described above by @deweyzeph where the available funds increase over time.
The extra funds deposited stay available throughout while saving on interest as the bank nett the outstanding capital with the available balance. In effect the outstanding capital will be paid off earlier than full term.
 
ChristelleH said:
Okay, thanks for that. Only thing I dont understand now thou is, if Im paying R700k on my bond, why is my repayment per month not going down?
Because then my total owe decreases by R700k?
Click to expand...
Paying extra into the loan will mean you will just pay off the outstanding balance sooner. The additional funds help reducing the outstanding balance and interest every month.... meaning that the precalculated (and fixed) instalments will now clear the outstanding balance sooner.

The alternative is contacting the bank and asking them to capitalize the additional payment - which could mean a new contract and additional fees and possibly also a new rate. Not always a good thing. Depends on bank etc etc. However going this route they will deduct the additional payment from current outstanding capital loan amount and then the new outstanding balance will be refinanced over a new term that you choose resulting in new (lower) instalments.
 
A3@MBB said:
Standard Bank does not work the way as described above by @deweyzeph where the available funds increase over time.
The extra funds deposited stay available throughout while saving on interest as the bank nett the outstanding capital with the available balance. In effect the outstanding capital will be paid off earlier than full term.
Click to expand...

Yes, FNB works in weird and mysterious ways. When I first started overpaying into my FNB bond I was mystified why my available balance was always increasing every month and then I realised it was increasing by the exact amount of rebate interest I was earning on the overpayment every month.
 
ChristelleH said:
Okay, this helps. My main goal is to reduce my monthly payment.
Click to expand...

Just remember you can't have it both ways. Your overpayment can either reduce the time it takes to pay off your bond or it can reduce your monthly payment (by capitalising on request) but not both. Just realise that if you capitalise your overpayments you will not have access to that money, it effectively stops being an overpayment.
 
deweyzeph said:
Just remember you can't have it both ways. Your overpayment can either reduce the time it takes to pay off your bond or it can reduce your monthly payment (by capitalising on request) but not both. Just realise that if you capitalise your overpayments you will not have access to that money, it effectively stops being an overpayment.
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You can have the best of both. Simply withdraw the interest savings each month and you've effectively lowered your payment.
 
Speedster said:
You can have the best of both. Simply withdraw the interest savings each month and you've effectively lowered your payment.
Click to expand...
If I keep withdrawing from the flexi account, the money will eventually run out right? Meaning, if the interest accrued on the money is less than the amount I withdraw, the total in the flexi account will decrease over time?
Say I pay R700k into my bond, it sits in the flexi account, repayment stays the same but I withdraw R7000 from my bond (flexi account) every month, the R700k will over time run out?
 
ChristelleH said:
If I keep withdrawing from the flexi account, the money will eventually run out right? Meaning, if the interest accrued on the money is less than the amount I withdraw, the total in the flexi account will decrease over time?
Say I pay R700k into my bond, it sits in the flexi account, repayment stays the same but I withdraw R7000 from my bond (flexi account) every month, the R700k will over time run out?
Click to expand...
Well yes. If it never ran out you'd have discovered an infinite source of funds.

You can however withdraw what you paid too much (i.e. your interest savings). That way your balance should always remain at R700k
 
Speedster said:
Well yes. If it never ran out you'd have discovered an infinite source of funds.

You can however withdraw what you paid too much (i.e. your interest savings). That way your balance should always remain at R700k
Click to expand...
Very stupid question, but how can I calculate my interest savings? To have an idea how much I will be able to withdraw without decreasing the R700k....
 
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