When you first bought your house 4 years ago, you earned R17,500 per month
and could not afford a deposit. The bank gave you a 100% bond for R500,000
at the prime lending rate. As time marched on, your house has appreciated in value, you
have paid off a proportion of your debt, and you have received a few pay
increases over the years. The reason the bank lent the money to you at prime
(not the lowest available rate) is because:
 |
Your loan to value amount (a 100% bond is high). |
|
You only earned just enough to qualify for the bond. |
However you now earn R25,000 per month, you have paid off R35,000 of the
original loan amount and your house is worth R950,000. So now:
|
Your loan to value amount (50% is low) |
|
You earn more than enough to qualify for the loan. |
| Less Risk to the Bank + stable track record =
Better Rate. |
But you also owe money on other lenders...
|
R200 000 cars. |
|
R10 000 on credit. |
|
R50 000 overdraft. |
If you used the value of your house to get a bigger bond (75% of your house's
value), you could pay off all these debts and only pay off your homeloan at the
new
LOWER, interest rate.
IMPORTANT: You must try and pay off the other debts in the same amount
of time as you would have done i.e the cars term = 5 years.
| Simple method + responsible payment = Rxxxxxxx
savings* |
*In this example you could have saved up to R950 per month
