For most South Africans, a home loan is probably their biggest monthly financial commitment. But managed strategically, it can become a powerful financial tool to reduce interest costs, build wealth, access affordable credit, and fund future investments.

 As a home loan is secured against your property, it generally carries a lower interest rate than unsecured credit such as personal loans or credit cards, making it an effective long-term financial tool, says Bradd Bendall, BetterBond Home Loan‘s National Head of Sales. 

Save more by paying extra
One of the simplest ways to make your home loan work harder is by paying more than the required monthly repayment whenever possible. In most cases, the bank applies these additional payments to reduce the outstanding capital balance, meaning interest is charged on a smaller amount, says Bendall. Over time, this can result in significant savings on interest while shortening the repayment period. On an R2 million bond at the current prime lending rate of 10.5%, a payment of even R200 more each month will result in savings of just over R109 000 over the loan repayment period. It will also shave seven months off the 20-year bond repayment period. 

More flexibility with an access bond
“If you have an access bond, those additional payments are available to you,” explains Bendall. “You can generally withdraw the surplus funds should you need them, giving you flexibility and the benefit of paying less interest while the money remains in your bond.” For example, if your bond repayment is R20 000 a month but you consistently pay R22 000, the additional R2 000 each month will build up in your access bond and can be withdrawn when needed. “One of the benefits of this facility is that you won’t need to go through a lengthy loan application process again. The money is already available in your home loan account for easy withdrawal when needed.”

Unlike interest earned in a savings account, the interest saved by reducing your home loan balance isn’t taxed, making it one of the most tax-efficient places to keep extra funds. However, notes Bendall, homeowners can access funds only if they have paid over and above their required bond repayments, and not every home loan includes an access bond facility. Some banks require homeowners to apply for one when the bond is registered, while others allow it to be added later.

Homeowners contributing to a retirement annuity (RA) can also pay any tax refund generated by those contributions into their access bond. The money will reduce the interest charged on the home loan while remaining available to help fund future retirement contributions if needed.

Another simple way to save on interest is to pay your bond earlier in the month. As interest is calculated daily, making payments earlier in the month, or paying more frequently, can reduce the amount of interest charged over time, says Bendall.

Use your bond to build wealth
As you repay your home loan and your property’s value increases, the difference between your homeis value and what you still owe is known as equity. Many banks allow homeowners to borrow against part of this equity. Used correctly, your home can be used as collateral when purchasing another property, while an access bond or re-advance facility can provide access to available funds without forcing you to sell your home.

“If you use those funds to acquire or improve an income-producing asset, such as a buy-to-let property, the interest may be deductible against the rental income,” notes Bendall. He cautions, however, that homeowners must be able to demonstrate a clear link between the borrowed funds and the income-producing property. “If you draw from your home loan to help buy a buy-to-let property, the interest on that borrowing may be claimed against rental income, but only if the link with the rental activity is clear.”

Deductible rental property expenses may include bond interest, but not capital repayments, municipal rates and taxes, levies, building insurance, letting or agent commissions, and qualifying repairs and maintenance.

Pay for life’s bigger expenses
A home loan can also provide a more affordable way to finance major life expenses than unsecured credit. Bendall recommends keeping a bond account open, even after it has been paid off, for a small monthly facility fee. “Borrowing against the equity in your home by extending an existing bond is often one of the most affordable ways to access finance,” he says. “It could help fund tertiary education, finance accommodation for a child while they’re studying or cover other major expenses without taking out more expensive forms of credit.”

Fund lifestyle changes
If you’ve owned your home for several years, it may be time to invest in renovations and maintenance. “As your property’s value grows, so does the equity you’ve built,” says Bendall. “That equity can be used to finance upgrades that may also increase your home’s market value.” Strategic improvements such as modernising kitchens and bathrooms, improving energy efficiency or adding living space can improve one’s experience of the home, as well as its long-term value.

But, borrow wisely
While having access to the funds in a home loan offers flexibility, Bendall cautions against using it to fund lifestyle spending or depreciating assets such as vehicles. Also, borrowing from your bond could delay your bond repayment and cost more interest over time.

“Every borrowing decision should support your long-term financial well-being,” he says. “Used wisely, your home loan can become one of your greatest wealth-building tools, but it’s important to borrow only what you can comfortably afford to repay.” He also advises homeowners to understand the features banks offer, as access bonds and re-advance facilities differ between banks, and to seek professional tax advice before claiming any deductions from SARS.

A home loan is often viewed simply as a monthly expense, or a debt burden, but it can be much more than that. “Managed wisely, it can become a flexible financial tool that helps you reduce interest costs, grow your wealth, fund life’s major milestones and unlock opportunities without taking on expensive unsecured debt,” says Bendall. “The goal isn’t to borrow more but to make smarter use of one of the biggest financial assets most South Africans will ever own.”