- Finding ways to save money on your home loan also reduces the amount of time it takes to pay the home loan off.
- A home loan comparison service can help you find a home loan deal with lower interest rates. Just 0.25% of the interest rate amounts to significant savings.
- Just an extra R1 000 on your monthly bond repayment can also significantly reduce the total amount repayable.
A home loan is a significant financial investment. But however daunting a debt it may seem, this debt can be paid off quicker than you think. Let the prospect of the freedom that comes with debt-free home ownership be your motivation, as you undertake the task of reducing your home loan.
3 Ways to save on a home loan
These methods can help you save as much as R40 000 on your home loan, allowing you to pay your bond off ahead of schedule.
1. Use a home loan comparison service
A home loan comparison service such as ooba Home Loans can take your home loan application to multiple banks, allowing you to compare deals and find the one with the lowest interest rates.
Does a 0.25% discount in the interest rate that you are paying on your home loan really make that much of a difference? It can, especially for first-time homebuyers who struggle with affordability. A 0.25% reduction in the rate on a R1 million home loan can save the buyer almost R40 000 over 20 years. You can use ooba Home Loans’ Bond Repayment Calculator to determine how much a reduction in interest rate will save you.
Banks compete for your business, and you can use this to your advantage. ooba Home Loans is successfully securing approval for almost 80% of the bond applications we submit to the banks, while ensuring our clients get the best possible interest rates on their loans.
2. Put down a bigger deposit
The bigger your deposit, the lower your interest rate and monthly repayments. It’s a short-term expense that adds up to significant long-term savings.
For example, on a 20-year home loan of R1 000 000, you’d normally put down a deposit of about R100 000 (the standard deposit is 10% of the purchase price). Your total repayment will be R 1 674 646 over the course of 20 years, with a monthly repayment of R 6 978.
Now say you decide to increase your deposit to 20% of the purchase price (R200 000). Your monthly repayment will be R6 202, and your total amount repayable will be R1 488 574. This means that you’ve saved just over R186 000 in the long term.
You can use ooba Home Loans’ Bond Repayment Calculator to determine how much a higher deposit will save you on monthly and total repayments.
3. Pay extra each month (or at least on the occasional month)
Paying extra into your bond on a monthly basis, whether it comes from salary raises, Christmas bonuses or any other extra cash you may acquire, will amount to significant savings.
Just an extra R1 000 per month could make a difference. Say you buy a house for R2 million and put down a R500 000 deposit. You have a R1.5 million bond at an interest rate of 7%. That gives a monthly payment of R11 629 over 20 years, with the total amount repayable being R2 791 076.
Let’s say you pay an extra R1 000 into the home loan each month. Your total repayment now goes down to R2 563 020 (a savings of R227 940), and your 20 year bond gets paid off in 16 years instead.
You can use ooba Home Loans’ Extra Payments Calculator to determine how much you save in the long-term with extra monthly repayments.
The first step to saving: Lower interest rates
As mentioned, a home loan comparison service like ooba Home Loans can help you save by finding the deal with the lowest interest rates.
So bear that in mind when the time comes to apply for a home loan. And also remember that ooba Home Loans offers a range of tools that can make the home buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.
Can't find what you are looking for?
Ranked #1 in Banking on Hellopeter
Average rating of 4.86 from over 4 550 reviews
Simply The Best
Ooba home loans services are simply the best. My Consultant Bianca Dancer was so hands on and helpful from the get go. She guided me through the entire process and put me at ease being a first time buyer. I highly recommend their services.
Jay Govender and Maleshini Reddy from OOBA provided outstanding assistance and guidance in securing our home loan. Response times were excellent and they were professional and friendly.
Estelle Vorster was really helpful in securing the best deal for my home loan, she not only negotiated a lower interest rate she went as far as securing 50% discount on the transfer costs.