Maximising Your Savings Through Home Loan Deposits and Lump Sum Payments
Category Property news
Savvy buyers and existing homeowners are increasingly recognising the powerful impact of making a deposit and strategically employing lump sum payments. These financial strategies not only lead to reduced monthly repayments, a lifesaver at the current 11.75% interest rate but also contribute to substantial savings over the lifespan of the home loan.
Consider if you took out a home loan of R1 500 000 at the current interest rate. If you opt for no deposit, your monthly repayment will be R16 256. However, if you put down a deposit of R100 000 (6.7% of the purchase price), your monthly repayment drops by over R1 000 to R15 172. Over 20 years, this drops your total repayment by R260 000.
This is a smart approach by buyers to minimise their exposure to interest rate fluctuations.
|
Deposit Amount |
Monthly Repayment |
Total Repayment over 20 Years |
|---|---|---|
|
R0 (No Deposit) |
R16 256 |
R3 711 000 |
|
R100 000 |
R15 172 |
R3 399 000 |
Empowering First-Time Buyers
First-time buyers, in particular, are embracing the potential of deposits. According to a leading South African bond originator, these upfront payments now account for an average of 9.6% of the purchase price, with the average purchase price recorded for these buyers in Q2 2023 being R1 120 173.
A buyer who invested R107 537 (9.6%) as a deposit on a home loan for R1 120 173 could see their monthly repayment decrease from R12 139 to R10 974, leading to a total saving of R279 000 over 20 years.
|
Deposit Amount |
Monthly Repayment |
Total Repayment over 20 Years |
|---|---|---|
|
R0 (No Deposit) |
R12 139 |
R2 913 000 |
|
R107 537 |
R10 974 |
R2 634 000 |
Unlocking Savings for Existing Homeowners
If existing homeowners make sum payments into their home loan account, this can make a substantial difference.
If you currently have a bond of R2 000 000 with 20 years left to pay, your monthly repayment is approximately R21 604, with a total repayment of R5 202 000.
However, consider the potential of lump sum payments:
|
Lump Sum Payment |
Reduced Repayment Term |
Reduced Total Repayment |
|---|---|---|
|
R30 000 |
18.88 years |
R4 909 000 |
|
R20 000 |
19.23 years |
R5 003 000 |
|
R10 000 |
19.61 years |
R5 100 000 |
If you don't have access to a lump sum, modest monthly additional payments can also lead to substantial savings:
|
Additional Monthly Payment |
Reduced Repayment Term |
Reduced Total Repayment |
|---|---|---|
|
R1 500 |
15.95 years |
R4 435 000 |
|
R1 000 |
17.04 years |
R4 637 000 |
|
R500 |
18.36 years |
R4 886 000 |
Whether you're a prospective homebuyer or an existing homeowner, these strategies offer tangible benefits. Not only do they lower monthly repayments, but also lead to significant savings over the term of the home loan. These approaches empower individuals to take control of their financial future and maximise the value of their property investments.
Author: Greeff Christie's International Real Estate
