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question

Posted by: Valerie | 2014/10/08 16:36

Can you pay your bond three times in the month to save on interest?

Nil

expert answer

Posted by: JP Farinha | 2014/10/13 07:37

Property buyers are often encouraged to make small additional payments into their bond account every month, as this can make a big difference on their outstanding balance in the years to come. In theory, dividing your monthly bond payments into smaller but more frequent payments can also save on interest. For example, if your bond repayment is due on the 31st of the month and you pay it in two instalments – one on the 15th and one on the 31st – you’ll be saving on the daily interest calculated from the 16th to the 31st. This is because your interest is calculated based on the daily balance of the bond, so by dividing your repayments and paying a portion earlier than required, you could reduce the amount outstanding across a given period, which could in turn reduce the interest applicable. Read more about this here: http://bit.ly/1rZ0XGs    

However, if you are considering using this strategy, it is important to discuss the finer details with the financial institution where your bond is held. Each institution may have varying regulations regarding how your repayments are made and the interest calculated. It would also be advisable to discuss if there are any penalties or restrictions that might negate the positive effect.

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user comments

Posted by: Anonymous | 2019/07/21 19:40
I have done many calculations and yes, you do save a bit, but it is really a minute amount to split your payment. What works for me, is to pay my installment and then I've setup an automatic future payment on my cellphone bank app to pay an extra R100 every day into my bond. The result is amazing.
Reply to Anonymous
Posted by: Anonymous | 2014/10/31 11:54
I see this system works too here in Australia where mksy pple get paid every week,so one can actually send a bondrepayment to SA every week
Reply to Anonymous
Posted by: Big man | 2014/10/23 14:21
Will the bank provide me with a bond if l have deposit of 50 % and bond the rest. have one bad mark on my name
Reply to Big man
Posted by: Anonymous | 2014/10/23 12:51
I see this kind of article quite regularly and it astonishes me that almost none of these financial "gurus" mention that if you are younger and have a bit of an apetite for risk, you could easily invest your additional funds elsewhere and earn a higher return than the rate of interest you are paying. It is not a tactic that can be recommended for everyone, as each situation is unique, but it is certainly worth mentioning. There is always a trade-off and if you do one thing with your money, there is always something else you could have done. Sit down, educate yourself, do the math and make an informed decision, which you feel is the best.
Reply to Anonymous
Posted by: Anonymous | 2014/10/23 12:20
I make payments every two weeks. Resulting in an extra two payments per year. You save on intrest and capital per year.
Reply to Anonymous
Posted by: Anonymous | 2014/10/23 18:35
Obviously if you making extra payments it will reduce your interest but not if you split your payment
Posted by: Anonymous | 2014/10/23 10:10
I have done the calculations and it does save you money but you have to obey some rules 1 it only works if your interest is calculated and compounded daily 2. You have to pay your full instalment on the due date or before. For example your bond is R400 000 and your repayment is R4000 per month and you normally pay R200 in interest when you pay the full instalment on the due date If you pay R2000 on 15th, the capital balance is reduced by R2000 for the remainder of the period, so your interest is calculated on the remaining debt (R398 000 instead of R400 000). Then you pay your full instalment on the due date (R4000). The interest charged on that due date is less (because you reduced your outstanding balance on the 15th) so you don't really win. What you should do is work out what your interest payment would have been if you had not reduced your balance and pay that amount. Then your bond comes down really fast
Reply to Anonymous
Posted by: Anonymous | 2014/10/23 18:35
In your example you are not splitting your payment you are paying an extra R2000 per month this will obviously be beneficial, but this is not what the question is
Posted by: Anonymous | 2014/10/23 09:03
This fallacy has been around for some time now. Has anyone actually done the calculations? Since most people get paid at the end of the month where does the person get the money to pay on the 15th? If they have the money then all you are doing is paying half a payment earlier than usual for one month and then from then onwards you will be paying 15 days late on half a payment. Yes if you have half an instalment extra pay it into your bond and then continue to pay your normal instalment at the end of every month don’t split it.
Reply to Anonymous
Posted by: Wendy webb | 2014/10/23 12:06
Correct. This system originated in the USA where many people are paid every 2 weeks.

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