Adrian Goslett, CEO of RE/MAX of Southern Africa, provides some excellent tips for paying off your bond faster in a cash strapped environment…

Many consumers aren’t aware that even a small additional payment into their home loan account every month can make a big difference.

"If you have a 20-year bond of R500 000 at an interest rate of 12.5 percent and you increase your bond repayment by just R300 a month, you could pay off your bond almost four years earlier and save more than R200 000 in interest," says Adrian Goslett, CEO of RE/MAX of Southern Africa.

Given the difficult economic conditions, however, many homeowners find their budgets stretched to the limit and should rather focus on saving on interest until the tides change.

In order to fast-track the repayment of your home loan with the aim to save on interest, Goslett advises homeowners to secure the best possible interest rate on their home loan.

"Every 0.5 percent reduction in the interest rate on a home loan of R1-million represents an interest saving of more than R85 000 on a 20-year bond. Even 0.1 percent will make a significant difference over the life period of a bond," explains Goslett.

He advises homeowners who have a good track record in making their bond repayments in full and on time to contact their bank to negotiate a better interest rate, or even consider switching from one institution to another to obtain a lower rate.

"However, if you decide to switch, be sure that the cancellation and penalty fees charged are not more than the savings you can achieve," he says.

A lower interest rate will not only significantly reduce the interest payable over the term of the bond, but it will also allow you the opportunity to pay extra into your home loan account every month. If you maintain the original repayment at a lower interest rate, you will be paying extra into your bond each month without having to find extra cash in your budget," he says.

Similarly, home owners can inform their home loan provider to keep their repayment at the current level should the interest rate drop.

"Even though the interest rate is currently at its lowest in 30 years, there has been some speculation about a further possible rate cut. The banks usually decrease your repayments automatically if the repo rate is reduced. By keeping your repayment amount constant as the interest rate drops, you will be paying extra money into your bond account every month without touching your monthly budget," adds Goslett.

Article continues on page two: a sneaky way to pay it off faster that you probably don't know about and the banks don't want you to know about...