Saving on intereset on Home loan?

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Chrispie`

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I was wondering if I take out a home loan from Standard-bank/FNB and get access to an access bond. You can transfer money into your access bond and withdraw again.

When I get my salary the debit order will go off and I have the rest of my salary to spent the way I want. If I have extra money I will transfer that to my access bond. But I may end up having an extra R5k that I need to survive until the next pay check but I do not necessary need that immediately. Aka I might only need that R5k in the middle of the month.

Will I gain anything (interest wise) if I were to pay the extra R5k into the excess bond on the first of every month and withdraw it again on for example the 16th. Even if I don’t get it immediately I can always use my credit card as 30days are interest free until I get the money back from my access bond.

Also, is there any benefit in paying one installment on the 1st of every month for example R10k vs having the bank deduct 2 payments of R5k that is one on the 1st and one on the 15th?

I am really trying to see where I can save on interest. I know transferring money into/out-of your access bond should be done with care so I do not transfer more than I should out of it. Also using a credit card for the scenario above needs to be done diligently which I always do.

Please if anyone can share some thoughts on this :)
 
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Interest is calculated daily, so yes, anything you put in will save you interest, even if only a few bucks per month.
10k on the 1st is better than two separate payments, for the same reason: the sooner you put money in, the bigger the savings.
Put your extra cash in your access bond, use your credit card's interest free period and only settle the amount necessary within 55 days.
 
Yes you would score some interest but it really comes down to whether it's worth the effort or not.

I mean on 5k if your interest rate is 10% that's like R41 a month you save, which if you are paying a fee to transfer it will amount to even less.

Like Friedpiet says the better bet would be to ride out your credit card and keep much bigger sums of money on the access bond.

But also be careful with that. It's a strong discipline game and an easy trap to step into.

The easier option might be to statically boost your debit order by a few hundred bucks that you can comfortably afford to go "missing".

That means the access bond builds up over time but also you absorb any interest rate changes more easily.

When that access bond starts getting to 50k and above it really starts working for you and you save hundreds every month.

You also have a good emergency fund should the **** hit the fan that pays your instalments.

The earlier you start doing it the better, because remember for basically the first half of your loan term you will be paying nothing but interest. Doing it "later" doesn't help much as you've given the bulk of it away to interest always.

The sooner you can lower the capital the better.
 
Friedpet said:
Interest is calculated daily, so yes, anything you put in will save you interest, even if only a few bucks per month.
10k on the 1st is better than two separate payments, for the same reason: the sooner you put money in, the bigger the savings.
Put your extra cash in your access bond, use your credit card's interest free period and only settle the amount necessary within 55 days.
Click to expand...

Thanks for your reply. My debit order is on the 28th of every month. Do you know when do the banks calculate interest from? Is this fixed for every member... question here is if it is the first it will be better to rather move my debit order to the first?
 
SauRoNZA said:
Yes you would score some interest but it really comes down to whether it's worth the effort or not.

I mean on 5k if your interest rate is 10% that's like R41 a month you save, which if you are paying a fee to transfer it will amount to even less.

Like Friedpiet says the better bet would be to ride out your credit card and keep much bigger sums of money on the access bond.

But also be careful with that. It's a strong discipline game and an easy trap to step into.

The easier option might be to statically boost your debit order by a few hundred bucks that you can comfortably afford to go "missing".

That means the access bond builds up over time but also you absorb any interest rate changes more easily.

When that access bond starts getting to 50k and above it really starts working for you and you save hundreds every month.

You also have a good emergency fund should the **** hit the fan that pays your instalments.

The earlier you start doing it the better, because remember for basically the first half of your loan term you will be paying nothing but interest. Doing it "later" doesn't help much as you've given the bulk of it away to interest always.

The sooner you can lower the capital the better.
Click to expand...

Thx - I cannot agree more about the discipline part. Will find out about the withdrawal fees.
 
Chrispie` said:
Thx - I cannot agree more about the discipline part. Will find out about the withdrawal fees.
Click to expand...

Shouldn't be any withdrawal fees.

I just meant if you aren't using a bundled banking package the usual transfer fees might make such a small amount seem really insignificant short term.

You want a longer term balance in there that keeps growing preferably.
 
Chrispie` said:
Thanks for your reply. My debit order is on the 28th of every month. Do you know when do the banks calculate interest from? Is this fixed for every member... question here is if it is the first it will be better to rather move my debit order to the first?
Click to expand...

The interest is calculated on the daily balance and capitalised monthly, ie every extra day that the money is in your bond saves you a bit of interest. Your debit order should be for the date that your salary goes through.
 
marlin178 said:
Firstly, your mindset is 100% correct here so kudos to you for being responsible about your debt.

There's some really good advice that's been given above so implement it with discipline and in the long term you'll see the benefits. Try klap your bond as quickly as possible. The small amounts all add up!

Further reading if you're interested:
https://businesstech.co.za/news/banking/170475/how-to-use-your-home-loan-to-its-fullest-potential/
Click to expand...

Thanks so much - this is very useful ;)
 
When you get your salary, move that into your bond. Then live from your credit card. Switch debit orders where you can to your credit card.

In time you will see a snow ball effect !
 
zerocool2009 said:
When you get your salary, move that into your bond. Then live from your credit card. Switch debit orders where you can to your credit card.

In time you will see a snow ball effect !
Click to expand...

To further maximise this, get the credit card from FNB and earn ebucks. In my instance, earning ebucks is like FNB paying you to bank with them. Average about R1200 per month profit like this.
 
laven said:
Hi
You could also look at FNB's One Account.
https://www.fnb.co.za/home-loans/one-account.html
Click to expand...

thats not a very good idea. The one account isnt like a bond's flexi account (You can prepay, but cant money as you like).

I have a friend who has this, and we compared the one account with a flexi bond.

Some notes:
1) on the flexi bond you dont pay fees when you prepay the bond (BUT there are fees when you desposit large cash sums via an ATM (I know that)).
2) on the flexi bond you can take the prepaid money without asking
3) on the one account, it works half half like a flexi, but not, and fees are charged
 
zerocool2009 said:
When you get your salary, move that into your bond. Then live from your credit card. Switch debit orders where you can to your credit card.

In time you will see a snow ball effect !
Click to expand...
This is new to me. I did not know you can have debit orders go from your credit card. A good side effect is that you also utilise your credit card meaning your credit score might improve a bit. Of course, you need to keep close track of your budget.
 
Pakka said:
This is new to me. I did not know you can have debit orders go from your credit card. A good side effect is that you also utilise your credit card meaning your credit score might improve a bit. Of course, you need to keep close track of your budget.
Click to expand...

You can't have debit orders on a credit card but some companies allow you to pay with credit card instead of debit order.
 
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