Homeloan Question

Either way, what you should be aiming for with an additional payment is the principle amount. (eg. R1m)

If you put R10'000 towards the R1m principle amount, the amount of interest the bank can charge you next month becomes less, so it's a win win. The next month, they can only charge you interest on R990'000.

If you are paying off the interest alone, the principle debt amount stays the same (R1m), so next month's interest will still be calculated on a principle debt of R1m.

This is simplified, but thats the idea.

If I'm not mistaken, the Consumer Protection Act ensures that any additional sum paid into a bond should go towards the principle debt automatically. So whether you're going into the branch and doing a deposit into the bond account, or doing an internet transfer from your savings account to the bond account, the net result should be the same as previously pointed out.
 
Drifter said:
No , it does not. On all bonds the interest is calculated daily.
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Not recently but 2 years ago I was informed by fnb that on my access bond the non capitialised amount didn't factor into the interest calculation
 
Steamy Tom said:
Not recently but 2 years ago I was informed by fnb that on my access bond the non capitialised amount didn't factor into the interest calculation
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Cius said:
That is insane. What a rip off.
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That's the way it is supposed to work. They calculate interest every day based on the outstanding balance. Then they only add that interest amount to the outstanding balance at the end of the month (i.e. capitalise it). So no, it's not a rip off, it actually works to your benefit because your interest is calculated on marginally lower amounts than it would be if it was capitalised daily. Any additional payment that you make will impact the interest calcs from the day that it clears because your outstanding balance will be lower.
 
Jehosefat said:
That's the way it is supposed to work. They calculate interest every day based on the outstanding balance. Then they only add that interest amount to the outstanding balance at the end of the month (so no, it's not a rip off). And additional payment that you make will impact the interest calcs from the day that it clears because your outstanding balance will be lower.
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you aren't understanding
 
Steamy Tom said:
you aren't understanding
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What am i missing? I had an access bond at FNB and that is exactly how it worked. My bond is now at Investec and that is how it works. I also work at a bank and I know that is basically the industry standard for how access bonds treat interest and additional payments.

Please explain to me what I'm not understanding?
 
Jehosefat said:
What am i missing? I had an access bond at FNB and that is exactly how it worked. My bond is now at Investec and that is how it works. I also work at a bank and I know that is basically the industry standard for how access bonds treat interest and additional payments.

Please explain to me what I'm not understanding?
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I am saying that fnb said the interest calculation was calculated on the balance which was capitalised.
 
Steamy Tom said:
I am saying that fnb said the interest calculation was calculated on the balance which was capitalised.
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And any additional payment is automatically capitalised as soon as it clears. The only thing that isn't capitalised immediately is the daily interest that is calculated. That is only capitalised monthly.
 
Jehosefat said:
And any additional payment is automatically capitalised as soon as it clears. The only thing that isn't capitalised immediately is the daily interest that is calculated. That is only capitalised monthly.
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you dont understand an access bond do you?
 
Steamy Tom said:
you dont understand an access bond do you?
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He understands how it's supposed to work. But maybe not what you described. The fact that your extra payments don't count towards the interest calculation - that's very strange and I'd be very unhappy about that. You're basically getting 0 benefit for putting any money in there
 
Steamy Tom said:
you dont understand an access bond do you?
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I've never heard of an access bond that works the way yours does, and I'm not sure it would be legal for the bank to set up a way to make payments that don't reduce the balance.
 
jman said:
He understands how it's supposed to work. But maybe not what you described. The fact that your extra payments don't count towards the interest calculation - that's very strange and I'd be very unhappy about that. You're basically getting 0 benefit for putting any money in there
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i dont have that bond any more thankfully but this is what i was told at the time.
 
Steamy Tom said:
you dont understand an access bond do you?
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Considering I work with them on an almost daily basis I'd be willing to bet that I understand them better than you do...

All payments into (or out of) an access bond are immediately capitalised (it's illegal for the banks not to do this). The "non-capitalised" amount that you refer to in your post is any interest calculated on your outstanding balance since your last interest capitalisation date and has nothing at all to do with any payments that you have made.

It is literally not legal for a bank to operate an access bond in the way you are describing so I'm willing to bet your understanding of how access bonds work is the problem here.
 
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Jehosefat said:
Considering I work with them on an almost daily basis I'd be willing to bet that I understand them better than you do...

All payments into (or out of) an access bond are immediately capitalised (it's illegal for the banks not to do this). The "non-capitalised" amount that you refer to in your post is any interest calculated on your outstanding balance since your last interest capitalisation date and has nothing at all to do with any payments that you have made.

It is literally not legal for a bank to operate an access bond in the way you are describing so I'm willing to bet your understanding of how access bonds work is the problem here.
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sure bro...
 
Recallza said:
Hi Guys,

I'm uncertain which way forward is the best way, perhaps some of you can give your opinions..

I have extra money monthly, and I'm unsure whether to incraese my bond debit order amount, or to pay the extra money monthly into the flexibond?

I have a fair amount in my flexibond already, as far as I've understood it, by increase debit order, the money will go off towards paying off the bond, if I were to pay the money into the flexibond, it'll cut down the interest monthly, which in turn will increase the money going into the bond.

Any advice would be much appreciated
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Pay into your flexi-bond so that you still have access to the cash, in case you need it.
 
Any deposit into the homeloan account reduces the outstanding balance with immediate effect.

This further results in interest being paid on the reduced balance which is to your benefit, as interest is calculated on a daily balance. If the deposit into the homeloan is paid over and above the minimum payment which is required, this will be regarded as prepaid funds which can be utilised at a later stage.
 
zerocool2009 said:
Any deposit into the homeloan account reduces the outstanding balance with immediate effect.

This further results in interest being paid on the reduced balance which is to your benefit, as interest is calculated on a daily balance. If the deposit into the homeloan is paid over and above the minimum payment which is required, this will be regarded as prepaid funds which can be utilised at a later stage.
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Correct, .. you decrease the principle amount, owing...in turn decreases your monthly interest payable and you have access to your "prepaid" funds without any hassle of having to apply for it.
 
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