If you have an access bond facility, you can use your home loan as a savings mechanism. This wil help you reduce interest on your home loan as interest is charged on the outstanding balance. When you take into account the reduction in your interest charges, it can often outweigh the lower interest rate that you would earn on other savings products.
For example, paying an extra 10% of your repayment every month can carve off about five years of your bond term and save you a significant amount of interest. And even a once-off additional payment will make a difference in the long term.
Another benefit is that you have easy access to your savings, at no additional cost. The timeframe to get your funds paid is out is much shorter than if you had to apply for a further loan, which would involve a bond re-registration. If you have an access bond facility, you can access money via an ATM or online banking if you have a transactional account at the same bank.
Absa does not allow direct cash withdrawals. If you have an Absa home loan and you do not have an Absa transactional account, then you will need to request a bank cheque drawn in your favour at an Absa branch. This will cost you R70 including Vat.
When you access additional funds that you have paid into your home loan, there are no implications or any fees payable and your bond repayment remains the same.
Make sure that you check with your bank regarding the terms and conditions of your access bond facility. Some banks suspend or withdraw your access facility when:
- You are in arrears on your home loan.
- Legal action is being taken against you, because you have defaulted on your home loan repayments.
- Your mortgage bond is in the process of being cancelled.
This article was first published in City Press on 18 December 2013.