There are different ways to save money, but the most unconventional or perhaps least considered is saving through your home loan account.
Kathu Ramoliko, head of Gold Sub-Segment at South Africa-based First National Bank (FNB), said: “A home loan is a long-term financial commitment which takes years to repay.
“However, it can also be used as a savings tool over the life of the loan. In other words as a homebuyer, the loan provider can structure your home loan in way that allows you to pay extra towards the loan.
“The benefit is that you can save on interest and the additional money can be accessed whenever required using the Flexi Option.”
Using the FNB Flexi Option facility on your bond was a great way to put extra cash directly into your bond, Ramoliko pointed out.
“This this also means that if you need access to the cash you can withdraw the additional funds you have in the loan account. By adding your savings into your bond, you reduce the interest being charged, as every bit extra goes towards paying off a part of the loan, therefore the lower the loan amount the lower the interest.
“For example, if you have a bond of R700 000 over 20 years (240 months) with an interest rate of 10%. Your repayment every month would be R 6,755. If you pay an additional R500 per month, the loan will be paid off 43 months earlier, potentially saving.
According to Ramoliko, the Gold customer falls between the R7 000 and R25 000 monthly income brackets, and some within this group include first time buyers.
“About 56% of customers in the Gold base are first time buyers, and this is the group we focus our educational efforts on so that they begin making additional payments into their home loan much earlier,” Ramoliko said.