Belinda Beresford
The power of compounding interest is on your side when you make extra payments on your bond.
Say you have a R150 000, 20-year bond at 22% interest with Standard Bank. The total cost – capital and interest – of the bond would be R668 542, and the monthly repayment would be R2 785.
If instead of splashing out on prezzies at Christmas you managed to pay R1 000 into your bond each December, your loan would be paid off in 15 years and 11 months, and you would save yourself R151 719 in interest.
According to Nedcor, a R150 000 bond over 20 years at its current interest rate of 21,5% would cost you R2 726 a month. Your total repayments, including capital would be R654 221.
Paying an extra 5% on your bond would up your monthly repayments by just R136, but you would pay off the house in just over 13 years instead of 20.
Adding R500 a month to your bond payments would see you clear of your debt in just under eight-and-a-half years.
Conversely, missing an installment in the early part of such a bond at 20% interest would add approximately 10 years to your servitude and cost you another R204 000.