Is this true? Interest rate and bonds

NeonNinja

NeonNinja

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A friend of mine sent me a video of this guy talking about property and interest rates. Guy says if you pay R5k into your bond, you can do 2 x fortnight payments of R2500 each to kill off the interest quicker, or you can pay equal amounts each day (R166) and finish your repayments in 8 years or so thus saving on interest, and says you must specify in writing what your intentions are or where the money must go to to the banks.

Is he talking horse poo or there's validity to this?
 
Link to video?

Any extra payment reduces the total amount paid (interest saving), but you can never benefit by dividing up payments and spreading them out instead of paying in as much as you can ASAP.

You get charged interest daily, so the rule of thumb is put in money as soon as you can.
 
3WA said:
Link to video?

Any extra payment reduces the total amount paid (interest saving), but you can never benefit by dividing up payments and spreading them out instead of paying in as much as you can ASAP.

You get charged interest daily, so the rule of thumb is put in money as soon as you can.
Click to expand...
I'll have to upload it somewhere. He was saying the reason to pay daily is to kill off (or minimise) the interest charged.
 
NeonNinja said:
A friend of mine sent me a video of this guy talking about property and interest rates. Guy says if you pay R5k into your bond, you can do 2 x fortnight payments of R2500 each to kill off the interest quicker, or you can pay equal amounts each day (R166) and finish your repayments in 8 years or so thus saving on interest, and says you must specify in writing what your intentions are or where the money must go to to the banks.

Is he talking horse poo or there's validity to this?
Click to expand...
lulwhut?

You can prepay your bond at any moment.

Interest is determined on a daily basis.

So if you pay that R5k immediately you save more.

Always best to have a flexi bond. I have knocked years off my bond and millions in interest too.

You do not need to "state" your intentions.

Also R5k is very different on a 1m bond vs R10m bond.


Every single extra cent I have sits in my bond and can be pulled at a moments notice, none of this pay daily bs


Also this is NOT A SECRET thats just how the account works.

Next people will think settling your CC and paying zero interest is magic vs minimum monthly payment...
 
NeonNinja said:
A friend of mine sent me a video of this guy talking about property and interest rates. Guy says if you pay R5k into your bond, you can do 2 x fortnight payments of R2500 each to kill off the interest quicker, or you can pay equal amounts each day (R166) and finish your repayments in 8 years or so thus saving on interest, and says you must specify in writing what your intentions are or where the money must go to to the banks.

Is he talking horse poo or there's validity to this?
Click to expand...
If you have Excel there is a mortgage calculator template. Try it yourself.
 
NeonNinja said:
I'll have to upload it somewhere. He was saying the reason to pay daily is to kill off (or minimise) the interest charged.
Click to expand...
If you have the money at the beginning of the month, put it in the bond. No reason to sit on it.

Paying daily only makes sense if you bring in income daily and he’s saying you must put it in immediately instead of waiting until month end.
 
3WA said:
Link to video?

Any extra payment reduces the total amount paid (interest saving), but you can never benefit by dividing up payments and spreading them out instead of paying in as much as you can ASAP.

You get charged interest daily, so the rule of thumb is put in money as soon as you can.
Click to expand...
Unless you pay daily in advance of the due date (ie, if your bond payment is due on the last of the month, you prepay every day)
 
Sinbad said:
Unless you pay daily in advance of the due date (ie, if your bond payment is due on the last of the month, you prepay every day)
Click to expand...
If your money is coming in daily, and you’re putting it into your bond, sure. But if you get paid monthly, and you know some of it is for your bond, just put it all in on the day you get it.
 
We really need to pin a post on flexi bonds etc.

Many people seem to not understand how they work and how much you can save on prepaying your bond :(
 
Sinbad said:
That's not a prepayment though. That's an EXTRA monthly payment - look at the amount you're repaying each month on the right
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Well what exactly are we referring to here?

Paying your monthly payment early or an additional payment?

Paying your monthly payment early will save you a little def not knock off 12 years..
 
Snyper564 said:
Well what exactly are we referring to here?

Paying your monthly payment early or an additional payment?

Paying your monthly payment early will save you a little def not knock off 12 years..
Click to expand...

You pay nothing extra at all. The exact same amount every month. But just earlier in the month, or multiple times in the month. Or even paying the full amount at the beginning of the month insteas of the end of the month.

This is a problem for people who didn't manage 30% for maths.
 
Pegasus said:
You pay nothing extra at all. The exact same amount every month. But just earlier in the month, or multiple times in the month. Or even paying the full amount at the beginning of the month insteas of the end of the month.

This is a problem for people who didn't manage 30% for maths.
Click to expand...
Well then as I said paying it earlier in the month will save you very very little and once again not knock off 12 years.

That interest is total capital outstanding on a daily basis.

R166 off R1m on a daily basis is negligible.
 
I Recall seeing a similar video a few years ago, but If I'm not mistaken it was only relevant to the USA since the calculate their interest payments differently. In SA, like most of the replies indicate, the sooner you put your money in the bond account the better from an interest saving point of view.

As far as the "stating your intentions" part goes, I think that only becomes relevant when you are actually at the point of paying off the bond completely and closing the account, some banks charge and admin penalty if you don't give them notice that you intend to close or transfer the bond account. 30 or 60 days I think.
 
The notion of stating your intentions likely comes from an American principle of paying payments in advance, so they hold back the funds and then only utilise them as a payment when the payments become due. It's a scam IMO as then you're effectively paying them upfront with no interest savings, hence why they say to state that the funds must be used to reduce the principal amount and not as a prepayment of payments.

As someone else has stated, I doubt it'll knock that much time off by making daily payments, otherwise always being ahead by a month would have the same effect. You'd effectively save at most the interest on one month's repayment.

EDIT: Just to note, the prepaid payments thing is not the norm in the US, but likely some clever scheme that a banker worked out and said they'll assume all additional payments are prepaid payments.
 
3WA said:
If you have the money at the beginning of the month, put it in the bond. No reason to sit on it.

Paying daily only makes sense if you bring in income daily and he’s saying you must put it in immediately instead of waiting until month end.
Click to expand...
www.facebook.com

Vongani Risenga

www.facebook.com www.facebook.com

This is the video. Apologies he also speaks vanec.
 
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NeonNinja said:
www.facebook.com

Vongani Risenga

www.facebook.com www.facebook.com

This is the video. Apologies he also speaks vanec.
Click to expand...
This only works if you pay extra R5000 not prepaying that for the month.

Guy doesnt know what he is talking abt.

He says the following.

"I think you kill interest by 7 years, if im not mistaken" Sir you are very mistaken
 
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