Use your home loan account to save money

12 July 2018: There are different ways to save money, but the most unconventional or perhaps least considered is saving through your home loan account.

Kathu Ramoliko, Head of the Gold Sub-Segment at FNB, says “A home loan is a long-term financial commitment which takes years to repay, however, it can also be used as a savings tool over the life of the loan. In other words, as a homebuyer, the loan provider can structure your home loan in way that allows you to pay extra towards the loan. The benefit is that you can save on interest and the additional money can be accessed whenever required using the Flexi Option.”

Using the FNB Flexi Option facility on your bond is a great way to put extra cash directly into your bond. It also means that if you need access to the cash you can withdraw the additional funds you have in the loan account. By adding your savings into your bond, you reduce the interest being charged, as every bit extra goes towards paying off a part of the loan, therefore the lower the loan amount the lower the interest.

For example, if you have a bond of R700,000 over 20 years (240 months) with an interest rate of 10%. Your repayment every month would be R 6,755. If you pay an additional R500 per month, the loan will be paid off 43 months earlier, potentially saving.

According to Ramoliko, the Gold customer falls between the R7, 000 and R25, 000 monthly income brackets, and some within this group include first time buyers.

“About 56% of customers in the Gold base are first time buyers, and this is the group we focus our educational efforts on so that they begin making additional payments into their home loan much earlier. Customers have the option to set their debit order above the minimum repayment amount as a way of committing to extra payments on a regular basis,” adds Ramoliko.

“In principle, there’s nothing wrong with paying off your home loan over the 20-year time frame. However, if you are able to pay a little extra you can shorten the repayment time frame and reduce interest repayments and ultimately save,” concludes Ramoliko.

Consumers can now also use their FNB app to switch their home loan, this means being able to switch from the comfort of your home or get approval for a new one. Using the Banking App is quite efficient, once the switch application has been submitted it’s handled by a dedicated consultant from start to end. The applicant can also track the progress of the application on nav» Home to check the status of process.

“We have seen exponential growth in the channel with 1 million unique visitors to nav» Home. Applications on this channel have also grown 392% year on year, indicating that consumers are ready to embrace this enhancement.” concludes Ramoliko.