By law you are required to take out Life Insurance to cover the amount of your home loan and in most cases people simply accept the Insurance that is offered to them by the Bank.
It is your choice which Insurance company you use to cover your life and in almost every instance the cost of your Life Insurance will be significantly cheaper than the policy your bank offers you.
Using an Insurance comparison service gives you the opportunity to compare insurance quotes from South Africa’s largest insurance companies and get a much better premium than simply accepting the first premium you are offered. The simple fact is that Insurance companies are businesses just like banks, supermarkets or any other business that rely on you as a customer to grow their business.
Use your power as a customer to negotiate the very cheapest life insurance for your home by using a home insurance comparison service. This achieves 2 things, 1. you will be getting the cheapest possible life Insurance and 2. You will not be wasting time calling around to get insurance quotes from all of the Life Insurance companies to compare and then negotiate, this could take days!
If you are able to save just R100 per month on your life Insurance to cover your home loan and put that amount back into your home loan to reduce the capital amount of the loan, this will reduce the amount of interest that you will end up paying over a 20 year period very significantly. Try it, use the home loan calculator to see what a difference a R100/month additional payment into your home loan will do to your interest payment.
Home loan Calculator
Right, now that you calculated the enormous saving such a small amount will make, get the Insurance comparison people working to find you the cheapest Life Insurance to cover your home loan, cancel your existing Life Insurance from your bank and put that money to work paying off your home loan.
Home Loan Life Insurance Quotes
Millions of people in South Africa are in debt and are finding it very difficult to service their current debt with the ever present possibility that your assets may be attached by one of your debtors. Debt management is a responsible way to settle your debt over time without fear of having your assets attached.
Perhaps you have been retrenched or your working hours have been reduced due to downsizing or you have had credit thrust upon you by unscrupulous retail outlets. There are many reasons why people get themselves into positions where they are unable to afford making their payments and require the protection of debt management services to protect their lifestyles and assets.
Here are five good reasons to use a debt management program:
- Lower interest rate: Paying debt back with a lower interest rate will save you money. Creditors are made aware that you have joined a DMP (Debt Management Program) which works in your favour. The amount of money you owe in debt is added together and an average amount is calculated. The average interest rate is calculated to determine the interest rate of combined debt which will be repaid to creditors.
- Shortened payoff time: Paying off debt at a lower interest rate and saving money means that the duration to pay off your debt is shortened. This means that you have more money aside to make payments towards your principal.
- No reminders to pay debt from creditors and collection agencies: Once you have joined a DMP it will be clear to creditors and collection agencies that you are taking charge of paying your debt and repayment amounts are negotiated with creditors by the DMP.
- Reduce anxiety and stress: Worrying about being able to pay your debt and the possibility that a judgement may be obtained by one or more of your creditors is stressful. By taking responsibility for paying off your debt through a DMP will give you peace of mind that your debtors cannot approach the courts and obtain an attachment order.
- A single payment: By making one payment every month toward a DMP saves you from paying creditors yourself and also saves you on bank charges. The payment is often made electronically from your account which means that the various creditors are paid on time. The monthly instalment paid towards DMP is divided and paid directly to your the creditors. Once the creditors have been paid you are no longer in debt.
Using a debt management program makes sense if you are serious about covering your debt. While your existing debt is being cleared you cannot take out further debt and your credit profile will reflect that you are in debt management. This is often one of the best things can happen to many people who have a propensity to become over indebted where you are forced to only buy things that you can afford.
Going into debt management is a responsible and mature decision to make if you have over extended yourself and have little or no ability of meeting your debt obligations with your current income. Most of the time managing your finances is common sense. Spend within your means, stay away from credit cards, and use your money for necessities before you spend it on entertainment. Become financially aware by educating yourself and use a budget plan. It requires ambition and effort to stay debt free. Debt management is a secure and trusted way to clear and manage your debt. Take charge and responsibility of your life today and clear your debt!
Why is budgeting important? Because if you plan your budget well you could be bond free in just a couple of years. Your bond is a big noose around your neck and although the interest rate is less than your credit cards or vehicle interest, the length of time it takes to pay it off is crippling you with Interest. If you use the bond calculators to see the difference it makes to add an extra 10% or more to your payment, you will be astounded at how much interest it save.
Here are 6 reasons to keep your financial goals in check:
- No more debt: List your income and expenses. Budget for each item; fixed expenses such as car payments stay the same each month. Put a set amount of money aside for variable expenses such as food and clothing. Budgeting eliminates the need to overspend; it gives you control of the money you earn (income) versus the money you spend (expenses). To eliminate debt you need to derive a budget plan and monitor your spending. Eliminate the use of credit cards to purchase items you cannot afford. Stick to the budget at all times to stay out of debt.
- Make your dreams a reality: Another reason to budget is to finance for your long term goals; should you want to save for a holiday or to purchase a home. A sure way of attaining your long term and short term goals is to stick to your budget.
- Retirement: If you want to spend the best years of your life traveling the world then start a budget plan today. Build and renovate your home when you retire to live the life of your dreams. Whatever you choose to do; you can do so with a realistic budget plan.
- Be smart and save money: Overspending is common throughout the world; people live above their means. Allocate ten percent of your gross income towards savings; you might need the money for an emergency.
- Prioritize: Wants versus needs; keep your financial goals in mind. Focus on spending money on necessary items such as rent, car payments and savings before you overspend on entertainment.
- Eliminate financial stress: Budgeting is a secure and safe way to keep track of your expenses and save money. Using money wisely will give you the confidence you need to make your dreams a reality.
Budgeting is a good way to attain your financial goals in a responsible way. Many people use credit cards for impulse purchases; this is one of the reasons people are in debt. People spend more than they earn which puts financial stress and pressure on families.
Allow the money you earn to work for you by deriving a realistic financial budget. You can teach your children to do the same. It is possible to save for your future aspirations; discipline and focus are necessary to achieve your dreams with a realistic budget plan.
The banks are particularly aggressive when your bond falls into arrears and if you have experienced these calls you may feel the panic that goes with the thought that you may lose your home.
Financial pressure is a reality that we all experience from time to time but it is the way we deal with this reality that allows you to live without fear of losing your home. Debt can mount up very quickly and it is very likely that your home loan repayment is the single largest repayment that you have every month.
To manage the bond arrears successfully we need to understand that banks are not in the property business but in the lending business and they really do not want to reposes your home, they need to feel comfortable that there is a good chance that you will be able to repay the loan, albeit that you are in arrears. In order to make them feel comfortable it is important not to let your bond get more than two months in arrears and to make payments. The first thing you should do if you are unable to meet your debit order is go in to your bank a put a block on the bond debit order. By doing this you are immediately saving yourself a few hundred rand a month in bank charges. Thereafter make payments as and when you have money ensuring that at the date of of the regular debit order payment, your bond does not fall more than two months in arrears or you will begin to receive calls or even this type of selling a home proposal below.
- The property will NOT be marketed and auctioned as an Insolvency or as a Repossession. The advertising boards will also not
- say anything negative. They will simply read: SPECIAL POWER AUCTION ON SITE, with the auction date, a brief description of the
- property, the address and our contact details.
- The instant we receive the mandate, we will contact local agents and begin marketing the property.
- We will try to obtain a viable offer prior to going to auction with the help of local agents and notifying our database of clients.
- All the clients on our extensive countrywide database will be notified about the property. Advertisement boards measuring 800mm X 600mm will be erected
- at the property and surrounding area (in compliance with local municipal by-laws).
- 2 Weeks prior to the auction the date and details of the property will be published on our website.
- A map indicating the location of the property will also be available on the website.
- Our boards are designed to have maximum impact and they contribute greatly towards the success of the auction process and ensure obtaining maximum
- exposure for your benefit – your assistance in ensuring that boards are not removed, damaged or displaced will be appreciated and in your favour.
- The auction will be advertised in national, regional and/or local newspapers the week prior to the auction.
- Only Full Title Properties will be shown the Sunday prior to the auction from 3pm to 5pm – Please ensure that your pets are safe and well secured during
- these two hours (as well as on auction day), as the gates will be opened.
- An hour prior to the auction, the property will be open to allow potential buyers and interested parties to view the property and to become emotionally
- committed to the property.
How can debt in form be a good thing? This is a common question when faced with debt but acquiring debt can certainly be a very good tool with tax benefits under certain circumstances that can help propel your investment strategy forward and afford you the opportunity to use the banks money to grow your wealth.
Living debt free certainly provides you with peace of mind but it is important to consider which debt to be free from and which debt can be used to further improve your financial position. In it’s essence, relieving yourself of debt on high interest debt like credit cards and personal loans or any debt on depreciating assets like cars and appliances that are financed.
Debt on appreciating assets on the other hand is a completely different animal offering you the opportunity to grow your asset base and increase your wealth. The best way to illustrate this is through a comparison of different circumstances surrounding property purchases.
Let us assume that there are 2 individuals, each with R1 million to invest in property. The first buys a property for R1 million and enjoys it debt free. The second takes the R1 million and uses it to buy four R1 million properties, each with a deposit of R250 000, leaving him with 4 bonds totalling R3 million.
Now we need to consider the value of these properties over a period of 10 years, which according to the PPI(property price index) for the past 10 years is close to 200% giving us a value of around R3 million for the property that was purchased for R1 million 10 years ago.
Let us compare the results assuming that the person who bought the 4 properties still has the R1 million in cumulative bonds and has only serviced the interest portion over the 10 year period.
Person 1 has a property worth R3 million less his R1 million input and he has made R2 million.
Person 2 has 4 properties worth R3 million totalling R12 million but still has bonds totalling R1 million leaving him with R11 million in assets. He would have paid around R1.4million in interest and assuming there was no income generated through rentals, leaving him with a net investment value of R9.6 million. If of course there was a rental income, this figure would be dramatically different again.
This clearly illustrates that with the wise use of debt one can significantly grow ones wealth.
Your bond is an important tool that can allow you to achieve your financial goals quicker if used in the correct wealth generation manner.
Clever use of the equity available in your home loan can prove to be a very valuable wealth generation tool and here are a few ways in which best to use that home loan equity.
By using the equity in your home loan to purchase a vehicle, you could be saving as much as 4% in interest payments but it is important to pay the instalment amount as if you had financed the vehicle at the higher rate over a shorter period. By doing it this way you are saving a lot of money on your vehicle purchase but, if you do not pay what would have been the car payment it will end up costing you a whole lot more. Discipline is the key here, do not use you bond to make a vehicle affordable over the period of your bond.
In a similar fashion, by using the equity in your bond to repay credit card debt and paying the usual credit card payment amount directly into your bond you will again be saving a lot of interest. Credit cards attract the highest interest rate of most short term lending so it is important to be very careful with your credit card once the debt has been paid off from your bond. Never over extend yourself again on your card, only use the amount you are able to pay in full at the end of every month and pay the debt reduction instalment directly into your bond and you will again be saving a large sum of money in interest payment.
By increasing the excesses on your home and vehicle insurance you can dramatically reduce your premiums and in the event of a claim, you could easily withdraw money from your bond to finance the excess if required. The key to this strategy is to ensure that you drive carefully and live in a secure manner. Insurance is meant to be for unusual happenings but today it is often seen by people as an item replacement option, hence the high instances of insurance fraud in South Africa. Drive a little slower, never drive drunk and be vigilant around your home and you will save yourself a fortune in insurance payments with this strategy.
Make it your goal to repay your loans as quickly as possible to reduce interest amounts and ensure that you are well versed in the early settlement penalties that some institutions put on early settlement.
One thing to be very aware of is that South African banks require that in order to settle your home loan before the end of the term you as the bond holder are required to give them 3 months notice of settlement. By way of example, if you are selling your home, you must give the bank written notice of your intention to settle your home loan 3 months before the expected settlement date. If you do not settle the home loan in the 3 month period you are again required to give notice of home loan settlement. Never assume anything when it come to South African banks, call your bankers and get the answers before you do anything out of the ordinary, it could save you a lot of money.