Guiding consumers since 2009

A shocking cost

By Staff Writer

From mymoney.iafrica.com

Thu, 03 Apr 2008

Are you one of countless South Africans reeling from spiraling inflation
and the current economic squeeze? Do you feel like your disposable income
is diminishing and you are battling to service your credit obligations?

Looking for a cheaper interest rate on your homeloan - we can help!

Homeowners have not been spared either, with financial institutions
reporting an increase in foreclosures. Generally, more consumers find it
difficult to service their debt. This has cast a pall on the general
economic outlook.

John McGinn from Nedbank Home Loans Division says that, at times like
these, homeowners might be tempted to default on their bonds. This, he
adds, is not prudent given the implications that a bond repayment default
has on the terms of repayment and the amount of interest charged
thereafter.

Costly in the long term

"Missing a repayment on your home loan might seem innocuous, but the
consequences can be costly in the long term."

McGinn says the impact of missing one repayment on your home loan can be
better understood when one looks at the amount of extra money that a
homeowner has to pay as a result.

For example, if you have a bond of R615 000 at the current interest rate
of 14.5 percent and a repayment period of 240 months (20 years), you are
expected to pay a monthly installment of R7872. Your starting balance
after the first year's interest will be R622 871 and your total repayment
over 240 months is expected to be R1 8897 278.

If a homeowner skips just one payment and does not make arrangements to
pay it off, the repayment period balloons from 240 months to 261 months.

You'll pay R165 312 more

Instead of paying the original R1 889 278, you will now be saddled with an
amount of R2 054 590. Missing a payment, no matter what the circumstances, becomes costly in the long term.

McGinn says consumers, who find themselves under pressure and cannot fulfill their obligation to pay their home loan installment in a particular month,
should make an arrangement with their financial institution and make a plan
to pay off the installment as quickly as possible.

As the example shows missing even a single installment will add almost two
years to your repayment period while you'll have to shell out an extra
R165 312 in interest. This is, of course, not advisable and it should only
be done in the most extreme of cases, says McGinn.

Recent Articles

Featured It’s possible to change your marriage regime

Many people wed before they sign an antenuptial contract (ANC). This is especially practiced by people in customary marriages and those not clued up about the ANC. The law says if there’s no ANC before the wedding takes place, the marriage will automatically be in Community of Property. 

Keep this in mind when taking out new financial products

Adding a product to your personal finance portfolio, such as insurance or an investment, is a big decision. We found out what you should keep in mind before taking out a new product, how you can assess the products you already have, and how you can generally improve your financial position.

Are you in debt denial?

With debt levels increasing at 13% more than income levels, South Africans are more debt-stressed now than arguably ever before. This is iterated by the National Credit Regulator’s (NCR) report that nearly half of credit-active consumers in South Africa have damaged credit records. However, only a few seek the necessary help.

Why should you invest in a mutual bank?

Often when people think about banking, they always think about commercial banks. Mutual banks hardly come to mind, but these banks offer investment opportunities that are often overlooked.

 

Deals

Aurora Spa 100-minute Treatment Special

Price: R449
When: Until 31 March
Where: Century City

Woodstock Grill and Tap Steak Thursdays

Price: R100
When: Thursdays
Where: Woodstock

KFC 5+5 Special

Price: R65
When: Until 25 February 2020
Where: Nationwide