Pay slightly more than stipulated on your monthly bond repayments.
The South African Reserve Bank’s decision to keep the repo rate at 6,25%, thereby ensuring that the bank’s prime lending rate will stay at 10,25% and the likelihood of rates dropping in the near future, give wise bondholders an opportunity to consolidate their position, says Rowan Alexander, Director of Alexander Swart Property.
I and certain other property professionals predict that rates will drop by 0,25% to 0,50% in the short to medium term. Our advice to bondholders is to maintain and possibly even increase the current level of their monthly repayments. Do not, we say, simply accept the fact that you will now have a little more spending money. Use it instead to shorten your bond repayment period.
A 0,5% cut on a R1 million bond, says Alexander, will mean that the bondholders will pay R331 less per month on their bonds – and in all probability another R200 or more less on their credit card, vehicle and other HP accounts. Today’s young fast moving middle class, he said, are likely to see a R500 saving per month as insignificant – but it is not if they use that extra cash to pay off their bonds, supposing that rates remain constant, they could shorten their bond repayment time by just over three years – and pay a total of over R280,000 less on their bonds, a very big saving by any standards.”
Alexander says that this wise approach to bond paying may well call for a certain austerity, but it will also give peace of mind because, paying slightly above the stipulated amounts, bondholders can build up a cash buffer for possible use in future unforeseen hard times when they may find themselves struggling to meet their bond repayments.
We all know, as has been much publicized, that today’s yuppie generation tend to have an instant gratification, I want it now, approach to their finances. However, it is also clear that this is changing fast as a result of South Africa’s economy no longer being on a steep upward path. Those who, rightly, see the quick paying-off of their bonds as a top priority, their best means of building up their assets, will follow our advice and do just that.”
For further information please contact Rowan Alexander on cell phone number 082 581 3116 or by email rowan@asproperty.co.za.
02 Oct 2017
Author Independent author