Keep up Those Bond Repayment Rates Say Experts - 01-15-09

January 15 - Interest rates continue to drop, and property experts predict that 2009 may see rates drop by a further 2.5%. But while this may be welcome news for many homeowners, who see it as less pressure on their monthly budgets as their bond repayments also drop as a result, an expert at Rawson Properties has other ideas.

Sean McRauley, the Director of this South African property group, encouraged homeowners instead to keep paying 2008 totals, essentially above the current interest rates.

The logic in this, he said, was that South African homeowners would be able to pay back their bond earlier than they previously calculated, and, in the process, save themselves tens and even hundreds of thousands of rands in the long run.

"At Rawson Properties, we are trying to convince our clients to bite the bullet for a few more years if they can and pay above the stipulated rate," said McRauley. "The advantage of doing this is far greater than most people realize".

McRauley gave the example of homeowners who continued to their bond repayments at the same rates, despite the recent half a percent cut.

"On a R900,000 bond," said McRauley, "this means they are now paying in another R334 a month. That may seem an insignificant sum but, on a 20 year bond, it will cut 33 months off the full pay back period and save the bond holder R326,000 altogether.

McRauley elaborated on his example. "Supposing, as we expect, we do get a further 2.5% drop in interest rates in 2009 but the bond holder still continues to pay off his bond at 2008 levels," said McRauley. "He will save eight years on the repayment time and R729,000 altogether - a significant sum when you consider that on the model we are discussing the borrower signed for only R900,000 in all."