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Should You Pay Off Your Bond Ahead Of Schedule?

There are benefits and pitfalls to paying off your home loan sooner than expected, so technically there’s no right or wrong answer. It all depends on your individual circumstances, long-term objectives as well as how you plan to structure your own or family’s finances. Before you make any decisions, consider the pros and cons outlined below, and speak to a financial advisor about your personal financial goals to ensure that you make the best choice for your needs.

Advantages

Early settlement can help you save on interest, allowing you the freedom to pursue other ventures.
If you’re approaching retirement and are planning to settle in that particular home, it’s advisable to pay it off.
You eliminate the risk of defaulting if you’re self- or temporarily employed.
It provides a safe haven in tough economic conditions when there’s a lot of uncertainty.
Having more disposable income at hand can help you put more towards your short-term or retirements savings.

Disadvantages

Because a home loan typically offers you the cheapest debt available, you can save a lot of money in interest by paying off other debt first, such as personal loans, credit cards and car finance.
If you’re renting out the property you can save on tax, as interest paid on your bond is tax deductible.
Depending on your goals, diversifying by saving and investing the money elsewhere could be more ideal.
You will no longer have immediate access to debt at a low interest rate which could be used for renovating, emergencies or personal cash flow management.
As a property investor you can use the extra cash to put down a deposit on another property and still have access to funds in your bond.
You’ll be liable for bond cancellation fees and may be charged additional interest if you fail to notify your bank 90 days in advance that you’re planning to close your home loan account.

Contact us today to speak to one of our Financial Advisers for a free consultation. +27 14 594 2388