CAPE TOWN – One of the best “investments” open to ordinary consumers at the moment is just paying off the bond on their own home or an investment property, says Rudi Botha, the chief executive of BetterBond.
“The rate of return on doing this is the same as the interest rate on their bond, which currently starts at the prime rate of 10.25 percent and ranges upwards for most borrowers, so is generally far better than the return available on bank savings or even fixed-rate options, which currently range from as low as 2 percent to around 9.5 percent for very large deposits.
“Paying off your bond is also a dependable or low-risk investment, with no fees or transaction costs to pay, and completely tax free, unlike an investment in shares. And adding to your “investment” by paying an additional amount off your home loan every month will further boost your savings by shortening the lifespan of the loan and cutting many thousands of rands off the total interest due.”
On a R1 million bond, for example, paying an additional R800 a month will enable you to pay off your home in 16 years instead of 20 – and save more than R300 000 worth of interest.
What is more, he notes, you don’t just save interest when you reduce your bond repayment period – you also build up equity in your home at a faster rate, especially if home values continue to grow steadily.