1. Refinance Your Home Loan to a Better Rate
What is Refinancing?
Refinancing is when you take out a new loan to replace your existing home loan, usually at a lower interest rate. This can result in lower monthly payments and long-term savings.
Imagine you’re paying high interest on a store credit card. If you find a credit card with a lower interest rate, transferring the balance would save you money on interest. Similarly, refinancing your home loan to a better rate helps you save on the interest you pay over the life of your bond.
Example:
Let’s say you took out a bond of R1 million with an interest rate of 9%. If you manage to refinance to a rate of 7.5%, your monthly payment will decrease, and you’ll save thousands of rands over the life of your loan.
2. Pay More Than the Minimum Payment
Why Pay More?
When you pay more than the required minimum payment on your bond, you reduce the amount you borrowed. This decreases the amount of interest charged over time, ultimately saving you money.
Think of your bond like a credit card balance. The quicker you pay it off, the less interest you’ll be charged. By paying more than the minimum every month, you’re cutting down on the total debt, just like if you were paying off that high-interest credit card faster.
Example:
Let’s say your monthly bond repayment is R8,000. If you can afford to pay an extra R1,000 or R2,000 a month, you’ll reduce the overall debt quicker, saving you interest. If you do this consistently for a few years, you could pay off the loan in a shorter period, potentially saving hundreds of thousands of rands.
3. Make Lump-Sum Payments When Possible
What are Lump-Sum Payments?
These are one-off, larger payments that go directly towards paying down the principal of your bond. It’s common for homeowners to make these payments when they receive bonuses, tax refunds, or inheritances.
Think of a lump-sum payment as making a large deposit into your savings account. The larger the deposit, the faster your savings grow. Similarly, a lump-sum payment on your home loan decreases the principal, which reduces the interest you pay over time.
Example:
If you receive a R50,000 bonus at the end of the year, consider using that money to make a lump-sum payment on your bond. This could significantly reduce your loan balance, meaning less interest over the life of the bond.
4. Reduce Your Loan Term
How Does Reducing Your Loan Term Help?
By shortening the term of your loan (e.g., from 30 years to 20 years), your monthly repayments will increase, but you’ll save money in the long run because you’ll be paying off the loan faster and paying less interest overall.
It’s like paying off a store loan sooner. If you pay the loan off faster, you avoid paying extra interest over time. Even though your monthly repayments are higher, you’re saving money in the long term.
Example:
If you have a 30-year home loan for R1 million and choose to reduce your loan term to 20 years, your monthly payment might increase by R2,000 or more. However, by the time you finish paying off the loan, you’ll have saved tens of thousands of rands in interest.
5. Use a Bond Offset Account
What is a Bond Offset Account?
An offset account is a separate savings account that’s linked to your bond. The balance in this account is deducted from the amount you owe on your home loan, which reduces the interest you pay. The more money you have in the offset account, the less interest you pay.
Imagine you have a credit card balance, and instead of paying interest on the full amount, the bank gives you a discount for any money you have saved in a separate account. The same principle applies to an offset account.
Example:
If you have R100,000 saved in an offset account and your bond is R1 million, the bank will only charge you interest on R900,000, reducing your interest payments.
6. Shop Around for the Best Deal
Why Should You Compare Home Loan Providers?
Not all banks and financial institutions offer the same rates and conditions for home loans. Shopping around and comparing home loan offers could help you secure a lower interest rate or better terms.
It’s like shopping for the best deal on a car. If you compare prices from different dealerships, you may find a better price for the same model. Similarly, comparing home loan options can lead to significant savings.
Example:
If you’re paying an interest rate of 9% on a bond and find a lender offering 7.5%, this could save you thousands of rands over the life of the loan.
7. Avoid Additional Fees and Penalties
How Can Fees Add Up?
Banks often charge fees for early repayments, changes in loan terms, or missed payments. Avoiding these extra fees can save you money in the long run.
It’s like paying hidden charges when you dine out. If you don’t check the bill carefully, you might end up paying more than you expected. By being mindful of extra charges on your bond, you can avoid paying more than necessary.
Example:
If your bank charges a penalty for paying off your bond early, it may not be worth it to make additional payments. Always review your bond agreement and understand any fees before making changes to your repayment plan.
8. Set Up a Budget and Stick to It
Why Is Budgeting Important?
Creating a budget helps you allocate money for your bond repayment and track your progress. Sticking to your budget ensures you don’t miss payments and can make extra contributions when possible.
Without a budget, you might end up lost or overspending. With a clear plan, you can stay on track and avoid financial surprises.
Example:
By setting aside a portion of your monthly salary for additional bond payments, you’ll have a clear plan for paying off your home loan faster without stressing your budget.
Saving money on your home loan in South Africa isn’t just about making big changes; it’s about consistently implementing smart strategies. Refinancing, paying more than the minimum, making lump-sum payments, and using offset accounts are just a few of the ways you can save. By understanding the principles behind these strategies and applying them wisely, you’ll be on your way to reducing the overall cost of your bond, paying it off faster, and saving money for the future.
Questions after the interview:
At the end of an interview there is usually an opportunity where you can ask any questions you might have. This is a great opportunity to show the interviewer that you are interested in the position as well as the company. It is a good idea to prepare a few questions before the interview – this can be done while you are doing research on the company.
Your questions should show the interviewer that you are a good candidate for the position. Try and avoid questions that are based on your personal needs and preferences, for instance:
- How much leave will I get in a year?
- Will I be considered for promotion in my first year?
- When will I get an increase?
- What time can I leave in the afternoon?
These questions are inappropriate at this stage and will probably raise concerns on the side of the interviewer. Should you be the successful candidate then all these questions will be answered in your letter of appointment so don’t waste this opportunity by asking these basic questions.
If the position is an entry level job or very junior then you are welcome to ask questions in line with the position, for instance:
- Why did the previous person leave the position?
- What would the successful person be tasked to do in a typical day?
- How does this position fit into the department and / or company?
- Could you explain the company structure to me?
- Is there any further education assistance or support?
If the position is more senior then you can prepare question around the following themes:
- current issues that will face the successful candidate;
- inter-personal challenges in the department;
- any process, technology or people challenges that needs to be attended to urgently;
- key result areas that need urgent attention in the first few months;
The above information should get you started. Prepare a few questions so that you can show your worth. Good luck with your interview!
