An access bond allows you to pay any extra funds that you have, into your home loan account. Bear in mind that your monthly bond repayment consists of amongst other things, the capital amount that you borrowed, and an interest component. If you then pay in more than you actually need to, this is credited to the capital amount. This means that the interest will be slightly less, the next month. You will also have access to this additional amount because you have paid it in advance.
An access bond offers a tax-free savings opportunity by allowing you to effectively save money and at the same time, save interest on the loan!
This facility is either included in your home loan when your finance application is approved, or you can apply at your bank once your bond has been registered.
There are two different ways to set up your access bond:
The first is the default facility where your monthly instalment (capital and interest) stays the same each month, regardless of any extra amounts you pay in, and your home loan term will then decrease according to the extra funds you pay.
The second and alternative option is for the debit order amount to be adjusted, to take into account the reduced capital owing, which determines the amount of interest that is payable. If you want to pay off the bond sooner, the first option is then the better one.
It is important to note however that if you do build up a credit in your home loan (being the access facility we are discussing), then, once you do decide to access this credit and you draw money from the home loan account, then the interest repayment will of course increase again because now your home loan will be more than it was the previous month. But, that said, this is a far cheaper way of “borrowing” money than a short-term loan, where the interest rates are far higher than with a home loan.
The advantages of the access bond facility are therefore unlimited deposits, convenience, you save interest on your home loan, all at no additional fees. All of this whilst at the same time, your home appreciates in value.