PEOPLE are not forced to pay off their home loan any faster, but it does have its advantages.
Calvin Ndlovu, head of operations at FNB home loans, said while paying a home loan off earlier depended on your ability to do so, an early settlement would save on interest and leave you open to try other ventures.
He said that if you were approaching retirement and planning to settle in that particular home, it was advisable to pay it off.
“You eliminate the risk of defaulting if you are self or temporarily employed.”
Ndlovu said that having more disposable income at hand could be invested in your savings or retirement fund.
But he advised people to visit a financial adviser about their personal financial goals before taking this decision. “It is important that you are able to make informed decisions,” he said.
Ndlovu also gave the disadvantages of paying off your home loan early:
- Because a home loan typically offers you the cheapest debt available, you can save a lot of money in interest by paying off your other debt first such as personal loans, credit cards and car finance.
- If you are currently renting out the property, you can save on tax as interest paid on your bond is tax deductible.
- Depending on your goals, diversifying by saving and investing the money elsewhere is a better use of it.
- You will no longer have immediate access to credit at a low-interest rate which could be used for renovating, emergencies or personal cash flow management.
- As a property investor you can use the extra cash to put down a deposit on another property and still have access to funds in your bond.
