Buying a property will likely be one of the biggest purchases you make. It’s daunting to sign that bond document and think that you’ll be paying for your house for the next 20 or even 30 years.
It doesn’t have to be that way. Yes, buying a property is a long-term financial commitment, but with good planning and discipline you can pay off your bond much sooner and save tens if not hundreds of thousands of rand in interest.
Here are some tips to help you get over the line.
1. Check your credit score before you sign
Before you apply for a home loan, check your credit score. It’s a number based on your credit history, influenced by things like your total amount of debt, how many accounts you have, and what your repayment history looks like. A good credit score will help you get a lower interest rate on your home loan, which will reduce the total amount you’ll pay back.
If your credit score isn’t looking so hot, consider putting steps in place to improve your score before applying for a large bond and locking yourself into a higher interest rate. You’ll save a huge amount in the long run.
2. Save for a bigger deposit
The more you can pay for your house upfront, the less you’ll have to borrow from the bank.
Create a budget using 22seven and allocate a specific amount to save for your deposit each month. The benefit is twofold: you’ll pay less interest on a smaller loan; and when you eventually get that loan, you’ll already have the skills and experience to manage your expenses and save wherever you can.
3. Pay more than the minimum monthly amount
Once you have a bond, try your best to pay more than the mandatory minimum monthly instalment. Even small extra payments will snowball over time, shaving years off your payment period and saving on interest costs.
Remember that the interest rate fluctuates over time due to inflation and economic circumstances. If the interest rate goes down, avoid the temptation to decrease your monthly payments accordingly.
Similarly, if you receive any additional cash — a bonus, inheritance, tax back from SARS, salary increase, anything! — put it into your bond. Live humbly, pour money into your bond and watch the repayment amount tumble. You’re winning!
4. Clear your other debt
If you have any other high-interest debt — on a credit or store card, for example — try to settle it as soon as possible. Clear the decks and pay everything you were paying towards all your debt towards your bond alone.
5. Pro tip: Get an access bond
If you’re worried about putting all your extra savings into your bond and not being able to access that money in case of emergency, an access bond is a great solution. You can withdraw any amount in the bond over and above the minimum repayment. It’s genius: you can access your savings and — you guessed it! — save on interest at the same time.
Buying a property is a massive step in your financial journey. Think about it, plan for it, stick to your budget, be disciplined with your payments and you’ll be drinking a celebratory beverage on the porch of the house that you own in no time!