How your home loan can supercharge your financial future

What comes to mind when you think of a home loan? Monthly instalments, long-term financial commitment, outstanding balance? Fair enough! But how about looking at your home loan completely differently?

Powerful financial tool

Make the mind shift to seeing your home loan as a tool and an asset that holds a lot of power - not merely a financial commitment. Your bond is a powerful engine that could drive a number of positives, for example:

• Your home loan lets you get onto the property ladder.
• It puts you on the path to owning your dream home.
• Over time, it creates property investment opportunities.
• A home loan helps secure your future by letting you build and diversify your financial portfolio, and property has proven itself a stable asset class over time.
• Over time, it creates property investment opportunities.
• Your bond could make other dreams come true by providing a pathway to future access to funds, if you manage it responsibly.

Unlocking opportunity

Many homeowners are unaware of the financial opportunities that can be unlocked by the simple act of paying off their bond early. First-time homebuyers often don't realise the difference an amount as small as R250 extra per month can make when it comes to their home loan repayments. Every rand you pay into your bond reduces your outstanding balance and automatically means you pay less interest.

Paying off your home loan early saves time and money by bringing down your bond term and reducing what you pay in interest, but it also gives you access to capital that can be put to great use. It could provide the deposit on another property, or finance renovations on your existing home, which would consolidate your investment by increasing its value and improving its resale appeal.

What to do with lower interest rates

When the SA Reserve Bank lowers interest rates, as they did several times in response to the Covid-19 pandemic, it creates positive sentiment around property and draws homebuyers into the market. It's good to understand the different opportunities that these interest rate drops present for prospective property purchasers and existing homeowners in terms of making the most of your home loan. Take a look:

• For aspiring homebuyers, home loan affordability is key to a successful bond application, so lower interest rates give you more buying power and could make the difference in securing a place you've had your eye on. https://www.betterbond.co.za/calculators/affordability
• For existing homeowners who have home loans, lower interest rates could mean paying less per month. However, if you can afford to keep paying a fraction extra every month, you would be doing yourself a big favour. Instead of paying less each time the interest rate drops, try to keep paying what you were before, or even a bit more. You'd be amazed at the difference even minor additional payments could make in terms of both time and money saved! For example, if you're lucky enough to get a bonus at work, and you can put any possible additional payments into your bond, you'll soon reap the rewards.

Keep your bond account open

There are no penalties for paying off your home loan sooner than the term for which you signed up, typically 20 years. You should just let the bank know and - importantly - instruct them not to close your bond account. There may be a small admin fee involved, which differs between banks, but it's often worth keeping your home loan account open for the purpose of accessing funds again in future. For example, if you wanted to buy property again, you could access funds on the existing bond or property, to help you pay a deposit or even finance your new purchase.

These are just some of the ways in which your home loan could help to supercharge your financial future. Why wait? It's time to bond