Home loan: Pay a once-off extra R15,000, save R135,000

Once-off cash injections or regular small extra payments can reduce your bond term by a decade.     

The biggest debt that people carry, and for the longest periods of their lives, is their home loan, and meeting this repayment each month can be stressful.

Carrying this pressure for 20 years may very well be something most homeowners need to endure, but if you can rather pay off your home loan quicker, you should try by all means to do so.

There are a number of ways to do this and, granted, they may not all be achievable. However, if you can even take off a few months of your home loan repayments, that will make a big difference.

Imagine being free of home loan debt one year earlier? That is 12 extra months of not having a bond repayment hanging over your head.

Financial calculations: paying extra each month:

If you have a home loan of R1.5 million, repayable over a 20-year-term:

• Your monthly payment will be R16,256
• Your total repayment amount at the current interest rate will be R3.9 million

If you take this same home loan value over a 10-year period:

• Your monthly repayment will be R21,304
• However, your total repayment amount will be R2.55 million.

This means that by paying about R5,000 more a month, you will save just under R1.4 million on your home - and have 120 extra months of not paying a bond.

Obviously though, not everyone can afford to pay this much more every month, but it does not mean that whatever extra you can pay on your bond will not make a huge difference.

If you pay an extra R4,000 each month (R20,256):

• You will pay off your home in just over 11 years
• Your total home loan amount will be R2.68 million
• You will save R1.2 million

If you pay an extra R3,000 each month (R19,256):

• You will pay off your home in 12.3 years
• Your total home loan amount will be R2.84 million
• You will save R1.05 million

If you pay an extra R2,000 each month (R18,256):

• You will pay off your home loan in just under 14 years
• Your total home loan amount will be R3.05 million
• You will save R843,000

If you pay an extra R1 000 each month (R17,256):

• You will pay off your home loan in 16.29 years
• Your total home loan amount will be R3.37 million
• You will save R528,000

If you pay an extra R500 each month (R16,756):

• You will pay off your home loan in 16.75 years
• Your total home loan amount will be R3.59 million
• You will save R304,000

If, however, you cannot commit to making regular extra payments, you can still bring down your home loan repayment term and save money by injecting your bond with once-off payments.

If you make one once-off extra payment of R20,000:

• You will pay off your home loan in just under 19 years
• Your total home loan amount will be R3.7 million
• You will save R177,000

If you make one once-off extra payment of R15,000:

• You will pay off your home loan in 19.23 years
• Your total home loan amount will be R3.75 million
• You will save R135,000

If you make one once-off extra payment of R10,000:

• You will pay off your home loan in 19.48 years
• Your total home loan amount will be R3.8 million
• You will save R91,300

As part of your strategy to pay off your home loan quicker in the current economic climate, Richard Gray, chief executive of Harcourts South Africa, says it is important that you review your budget and make adjustments for the higher interest rates.

"If necessary, adjustments should be made to prioritise paying off the home loan faster and reducing the amount of interest paid over the life of the loan."

He also suggests that homeowners consider refinancing their home loans to shorter terms or lower interest rates.

"Refinancing your home loan can be a smart move if it helps you to save money on interest and pay off your bond faster. It's important to consult with a reputable lender and weigh the pros and cons before making any decisions."

Gray advises homeowners to make extra payments towards the principal debt whenever possible, such as using a bonus or tax refund to make an additional payment.

"Even making small additional payments on a regular basis can have a significant impact over time."