How to make your home loan work for you

How to make your home loan work for you

Many South Africans buying houses and committing themselves to home loans do so knowing that they are making the most important investment of their lives.

“Using a home loan is an integral part of a personal financial plan as it can enrich the bond holder’s life,” says Van der Hoven.

What thousands don’t realise is that responsible management of their bonds can also help them achieve other personal financial goals.

This is according to Andrew van der Hoven, Head of Home Loans at Standard Bank, who says savvy consumers can get their home loans working for them.

Van der Hoven says the keys to achieving other financial goals is having surplus balances built up in a home loan account and having an access bond. By opening an access bond facility on a home loan, extra money can be borrowed and used for other purposes.

“An access bond is often overlooked as an effective personal financial management tool. It allows the user to obtain surplus funds available in a home loan account as it is needed. Even if the user has no immediate need to access cash, having an access facility in place means that money is always available if an emergency occurs,” he says. 

 “An access bond can be a great financial tool to manage home loan repayments as money is always available if it is needed. However, even if available money isn’t used, the homeowner is in a ‘win-win’ position. The bond will be paid off sooner if the extra money paid in remains in the account.”

For example, if a bond is for R1 million over a term of 20 years at a rate of 10.5% interest and a deposit of R100 000 has been paid, repayments would be R8985.42 a month. By adding R500 per month you would see the repayment period being reduced to just less than 17 years and R221 475.08 being saved in interest costs.

“Most people spend a lifetime paying off a home. It makes sense to do sums, examine all options and then only source a home loan,” says Van der Hoven.

“Using a home loan is an integral part of a personal financial plan as it can enrich the bond holder’s life.”