How Do Home Loan Interest Rates Affect Your Pocket?

What would an interest rate cut of 0.5% mean in your pocket? To put it in simple terms, a home loan of R500 000 at prime (10.50%) over 20 years would work out to +/-R4,948 pm (excl insurance).

If you were able to get an interest rate of 0.50% below prime, or 10.00%, that would mean your installment would be R4,785 - a saving of R163.00. These amounts would be doubled up in the case of a R1 mil home loan.

So at the moment that mortgage would cost +/- R9,897 pm, and with a 0.5% cut it would be R9,570 pm, a saving of R327.00 pm.

If you look, you’ll see that at first glance these amounts may not seem significant, but if you take it over a year, that’s a saving of R3924, and that’s NOT INCLUDING INTEREST!

If you put that saving R327.00 back into your home loan on a monthly basis, you’ll pay off your loan in 18.16 years and not 20 years. The saving probably doesn’t seem like much does it? But further, consider this… the interest on that loan will reduce from R1,316,051 to R1,167,953 - That is a saving of almost R150 000 over the period of the loan!

That huge saving would be achievable, all because you put that additional R327.00 back into the bond every month.

Imagine what would happen if you made that R500?

Want more tips and tricks on how to reduce your rate on your home loan or for a refinance home loan? Please don’t hesitate to contact Zulika through http://www.gpfmortgage.co.za.