UNLOCKING THE POWER OF ACCESS BONDS: A COMPREHENSIVE GUIDE

by Taryn Davies Stevens • 3 MIN • 517 Words

UNLOCKING THE POWER OF ACCESS BONDS: A COMPREHENSIVE GUIDE

An access bond is a financial tool that can work wonders for managing your mortgage while also providing a safety net of extra funds if the need arises. This article delves into the details of access bonds, explaining their benefits and how to use them effectively.

WHAT EXACTLY IS AN ACCESS BOND?

An access bond is a unique type of home loan that grants borrowers the ability to withdraw any additional funds they've deposited into their bond, should they require them. Essentially, it allows homeowners to benefit from reduced interest costs on the smaller capital amount while having the flexibility to access those funds if circumstances demand.

THE POWER OF EXTRA REPAYMENTS

Wondering why you'd want to pay more than the monthly repayment amount? The answer lies in significant long-term cost savings through a reduction in the overall interest paid. Access bonds offer this financial advantage while providing the security of easy access to the surplus funds when needed.

UNDERSTANDING WITHDRAWAL LIMITS

It's essential to note that you can only withdraw the extra amount you've put into your bond, not the regular monthly repayments. Here's an example: if your monthly bond repayment is R10,500, and you've consistently paid R11,000 over ten months, you'll be able to withdraw R5,000 from the access bond (500 x 10).

Expanding your access bond facility will require the bank to conduct a full risk assessment, as mandated by law, ensuring you don't become over-indebted.

SMART STRATEGIES FOR USING YOUR ACCESS BOND

Maximize the benefits of your access bond with these effective techniques:

1. UTILIZE IT AS A SAVINGS ACCOUNT: Treat your home loan account as a savings vehicle. By depositing surplus funds, you're essentially saving at the loan's interest rate, without being taxed on the interest earned. This typically outperforms most other savings options.

2. SALARY MANAGEMENT: Consider depositing your salary directly into your bond account. Transfer just enough to cover essential deductions like debit orders and household expenses to minimize interest charges on your bond. The remainder can help reduce the principal amount further.

OBTAINING AN ACCESS BOND

All major banks offer access bonds. You can either include this facility in your initial home loan application or apply for it separately once your bond is registered. It's also possible to convert a standard bond into an access bond during the term of your home loan, provided you have maintained a good repayment history and are not under debt review.

EMPOWER YOUR HOME LOAN DECISION

In addition to extra repayments and access bonds, you can make use of home loan comparison services such as Prestige Home Loans. These services enable you to submit your home loan application to multiple banks, facilitating a comprehensive comparison of deals, and ultimately, allowing you to choose the option with the most favourable interest rates. It's a smart move that aligns with your financial goals.

By understanding and harnessing the potential of access bonds, you're not just managing your mortgage – you're empowering your financial future.

Intro Real Estate, it’s the right choice.

www.introrealestate.co.za // 011 422 3922

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