How to Save on Home Loan Repayments

November 5 - When interest rates increase, many homeowners, especially those with variable rate home loans, suddenly find that they are in financial trouble, unable to meet the monthly payment son their bonds.

According to an article that appeared in Personal Finance, to counter this problem, South Africans need to budget so that they can pay off extra on their home loan.

This is especially important to do when interest rates are low, so that when they do rise, consumers can avoid having to pay more.

According to the Property Strategist at First National Bank, John Loos, South Africans stand a real risk of getting into financial trouble if they don't begin to reduce their debt levels, especially if interest rates start to increase once more.

The most important advice given in the article is to try and pay back any loan - especially a home loan - as soon as possible.

The article gave an example of a R2 million home loan taken over a 20 year period at 11% interest.

The homeowner will pay R20,644 a month, and over a 20 year period, that will equal to a total of R2,954,404 in interest.

The means, that by the end of the home loan period, the homeowner will have spent R4,95 million on the home.

However, if the homeowner reduced the payout period to 15 years (essentially increasing the monthly payments to R22,732), the interest paid will be R2,091,749.

This is a total saving of R862,755 according to the bank.

As can be seen, making as much effort to increase those monthly savings could save the homeowner a significant amount in the long run.

11/5/2010 11:17:36 AM