How do Interest Rates Affect Your Pocket?

Today, reserve bank governer, Gill Marcus, announced that the repo rate will remain unchanged at 7.00%. This means that the prime home loans rate will also remain unchanged at 10.5%

What would a cut of 0.5% mean in your pocket?

To put it in simple terms, a home loan of R500 000 at prime (10.50%) over 20 years would work out to +/-R4,948 pm (excl insurance).

If you were able to get a home loan rate of 0.50% below prime, or 10.00%, that would mean your installment would be R4,785 - a saving of R163.00

These amounts would be doubled up in the case of a R1 mil home loan.

So at the moment that home loan would cost +/- R9,897 pm, and with a 0.5% cut it would be R9,570 pm, a saving of R327.00 pm

These amounts may not seem significant, but if you take it over a year, that's a saving of R3924, and that's NOT INCLUDING INTEREST!

If you put that R327.00 back into your home loan on a monthly basis, you'll pay off your loan in 18.16 years and not 20 years.

Doesn't seem like much? Further consider this... the interest on that home loan will reduce from R1,316,051 to R1,167,953 - That's a saving of almost R150 000 over the period of the loan!

All because you put that additional R327.00 back into the bond every month.

Imagine what would happen if you made that R500?

Want more tips and tricks on how to reduce your rate on your home loan or for a refinance home loan, please don't hesitate to contact me through www.gpfmortgage.co.za/contactus.html