Thursday, 30 March 2017 18:30

Interest rate proof your home loan

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“We welcome today’s decision by the Reserve Bank’s Monetary Policy Committee to maintain the repo rate at 7% as it provides some relief to consumers dealing with rising food inflation and taxes”, says Bruce Swain, CEO of Leapfrog Property Group.

Bruce_Swain_MD

“That being said, interest rates rise and fall and ultimately I would advise home owners not to worry about it too much.

We may be at the end of the recent rising cycle, we might not – rather focus on paying a little extra into your home loan every month and you’ll always have a buffer against any rates increases”.

Swain explains that if a buyer purchases a property for R1.2 million, with a deposit of 20%, with a repayment at 11% over twenty years, it will cost the buyer R9,819 per month (excluding interest and municipal rate fluctuations). However, if the buyer increases their repayment by R500 per month the term reduces by 3 years, with a saving in interest of R251,484. Increasing the repayments by one thousand rand per month, reduces the term by 5 years, saving the buyer R409,140 in interest.

“Paying in as little as R500 a month extra into your home loan significantly reduces the interest payable over the duration of the loan – making it interest rate proof in a way”, says Swain. 

Last modified on Thursday, 30 March 2017 18:38

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