A Fin24 user is wondering what percentage of her homeloan
repayments will go towards interest. She writes:
I am considering applying for a home loan and would like
advice on the following: If I get a loan of R1 200 000 at prime, i.e. 8.5%, I
would have a monthly repayment of R8 500.
This is what the banks' online calculation tools tell me.
However, what percentage of this R8 500 actually goes toward
paying off the bond capital, i.e. R1 200
000, and what percentage is just interest?
Jenny Rushin, Western Cape Provincial Sales Manager
at ooba, South Africa’s biggest bond originator advises:
For a home loan of R1 200 000 at prime (8.5%) over a 20-year
term, with no deposit, the monthly repayment would be R10 414. In the first month, the interest portion of
the repayment is R8 500 and the capital reduction (the amount you are paying
back towards the actual cost of the property) is R1 914. The interest portion
reduces every month thereafter, and the capital reduction increases.
If it were possible to secure a reduced interest rate of 8%,
then over 20 years with no deposit, the monthly repayment would be R10 037, of
which the interest payment in the first month would be R8 000, reducing monthly
thereafter, while the capital reduction would increase.
It is also extremely beneficial for you to allocate whatever
money you can to a deposit when making an offer on a property for two reasons:
first, because it will increase the likelihood of your bond application being
approved by a bank, and secondly because it significantly decreases your
With a 5% deposit - R60 000 on a R1.2m property - at prime
interest over 20 years, the monthly bond repayment reduces to R9 893. Even a
R20 000 deposit on a R1.2m home loan will reduce your total repayments by R41
656 over 20 years.
An expert mortgage originator can negotiate on your behalf
with the banks to get the lowest possible interest rate for you, and will help
you to structure your home loan in the best way to suit your requirements.
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