How you can cut years off your bond – and save up to R2 million

Small monthly additions to your bond repayments have massive long-term effects. They can potentially save you years of payments and close to R1 million on a 20-year bond and even up to R2 million on a 30-year bond.

As Samuel Seeff, chairman of Seeff Property Group, explains, there is no substitute for owning your home. It provides not only stability and security but also builds long-term wealth.

Property ownership should be a top financial priority for those who can afford it.

When you pay rent, you essentially pay off someone else’s bond, enriching your landlord. By contrast, owning a home means you’re investing in your own future and building your own wealth.

Getting a foot on the property ladder starts with maintaining a strong credit record, which will help you qualify for a home loan.

First-time buyers, in particular, can benefit from full loan-to-value home loans, and some banks even offer additional funds to cover related costs.

Additionally, if you purchase a home below R1.1 million, you will not have to pay transfer duty. Buying into a new development may also come with this advantage, helping make homeownership more affordable.

Once you’ve purchased your home, Seeff advises that maintaining and caring for the property is essential to ensure it appreciates in value over time.

It usually takes five to seven years for homeowners to start seeing capital growth and for the principal loan amount to decrease significantly.

As your home appreciates, it will add to your financial security and wealth.

For first-time buyers, Seeff recommends purchasing a home that is below your means and growing your property portfolio as your financial situation improves.

This might involve extending your current home or selling it for a profit to upgrade to a bigger property or one in a more desirable area.

This strategy allows you to build wealth incrementally without stretching yourself too thin financially.

One of the most effective ways to save money in the long term is to pay off your home loan faster.

This can be achieved by keeping your monthly payments the same even after interest rate cuts or by investing any extra funds you have into your bond repayments.

By doing so, you can reduce the repayment period by several years and save a substantial amount on interest payments.

Alan Rubin, Chief Operating Officer of Home Loans, echoes Seeff’s advice.

He encourages homeowners to maintain their monthly bond repayments at the current rate, even when interest rates decrease.

This tactic accelerates debt repayment and can lead to significant savings.

The math

Envisioning an interest rate of 10% may sound like wishful thinking, but it’s worth noting that experts believe the cutting cycle will terminate after a 150 basis point drop, which could end around the middle of 2025 at the July meeting (repo rate at 6.75%).

To put this into perspective, the average home price in South Africa is R1.427 million.

With a 20-year bond at the current peak interest rate of 11.75%, the minimum monthly repayment would be R15,461.

If interest rates drop to 10%, and you continue to pay R15,461 per month, you would be overpaying by R1,693 each month.

This extra contribution would shorten your bond repayment period to 14.71 years, saving you more than five years of payments.

In addition, you would reduce the total repayment by nearly R1 million, specifically R981,015. The savings are even more impressive on a 30-year bond.

By maintaining the higher monthly instalment (R14,401 at prime) after the interest rate falls to 10%, you could cut your loan term to just over 17.5 years, meaning you would pay off the bond in nearly half the expected time.

In this case, the total savings on your bond would exceed R2 million—R2.15 million, to be precise.

This approach to managing your bond payments not only saves you money but also provides greater financial security and freedom.

Paying off your home faster means you’ll own it outright sooner, freeing up your finances for other investments, savings, or lifestyle choices.

By strategically making small extra payments to your bond, you can significantly reduce both the time it takes to pay off your home and the total amount you’ll pay in interest.

Over time, these small efforts can translate into enormous financial benefits, potentially saving you millions and securing your financial future.

Read: Massive property tax headache for South Africa – the third worst in the world