Buying a home is expensive; most of us would not be able to do it without help from our bank in the form of a home loan (or bond). However, although necessary to help us achieve one of life’s most important goals, home loans do need to be paid back with interest in the form of monthly instalments over a number of years. Like any loan repayment, this can take a significant portion from our salaries each month.
Fortunately, there are many ways you can save money here or there and then use it to increase your monthly repayments, shaving years off your repayment term. Let’s look at an example:
Say you take out a home loan for R1 million at an interest rate of 10% per year for 20 years. Each month, you will pay a R9 650 instalment to meet the repayment term. But if you add R1 404, bringing your instalment to R11 054, you will pay off your home loan in 15 years – five years less.
Now, R1 404 is a lot of money for most people, but some simple lifestyle changes can help anyone save a good chunk of cash each month:
Drink less coffee: Most of us need coffee to get going in the mornings, but buying one from a chain is a financial death trap. On average, a “designer” cappuccino costs R25. One every weekday morning adds up to R500 each month.
Take lunch to work: Take-away lunches cost around R50. If you have one three times a week, that’s R600 a month. A good idea is to prepare your work snacks from your dinner leftovers the night before.
Sign up for rewards programmes: Most retailers these days reward customers for shopping in their stores with discounts or two-for-one specials, for example. Taking advantage of these offers can save you hundreds each month.
Eating out: Restaurant dining and fast food is one of our biggest expenses: the average family of four spends almost R15 000 annually on takeaways. The solution? Limit this treat to once or twice a month.
Plan your errands: Plan to do your shopping, bill paying etc. all in one place on one day so you save petrol and, so, money.
Of course, the best strategy is a pre-emptive one: Save for a deposit of at least 10% of the purchase price before you buy. This will help you decrease your monthly repayment amounts, allowing you to more easily increase them in future.