Understanding access bonds

Understanding access bonds

As the needs of customers change, financial products are changing to suit them, which is why you’ll find that access bonds have become more and more popular over the years. So, what exactly is an access bond and how can it benefit you?

Home loan basics

A bond is a loan where your house is used as collateral.

What this means is that when a bank or any other financial institution lends the buyer money to buy the property, the house is used as security in case the payments aren’t made.

Of course, there is interest added to the home loan, which has to be paid back over a specific period of time.

While the monthly repayments are agreed upon in advance, they may also fluctuate when interest rates rise and fall.

Access bond

If you’ve paid extra money into your bond, an access bond allows you to withdraw the extra funds if you ever need them.

This means that you’ll pay interest on a smaller capital amount while the extra money is in the bond, but you have access to the cash if you need it. All banks offer these access bonds.

You can either add the facility into your home loan when the financing is approved or you apply for the facility after your bond has been registered.

It’s easy to convert your normal bond into an access bond at any stage, as long as there have been no problems with the loan process and the repayments on your account.

An access bond can be really helpful in today’s economy and ooba has a few tips on ways to invest any extra cash you may have:

Deposit into your home loan account and you’ll save on the rate of interest on the loan without having to pay tax on the interest you save.
Deposit your salary into your bond account and transfer the sufficient funds into your current account to cover deductions like debit orders and household expenses.
At the end of the day, having an access bond means that you’re saving on the interest you would have had to pay if you hadn’t deposited the extra funds. Plus, you get peace of mind knowing you have access to that money when you really need it.

Article originally on Ooba.co.za

1st March 2016