Everything your access bond can do for you

It's no secret that buying your own home is one of the biggest and smartest investments you will make in your life. A fact that is slightly less widely known is that your home loan can be much more than just a home loan - it can be an extremely effective way to manage your money and save. By making your bond an access bond and putting extra money into it whenever you can, you can create a nest egg for yourself and lower the amount of interest that you are required to pay over the duration of your 20-year loan.

How does an access bond work?

In a nutshell, there are two ways in which your home loan can be a source of funds when you need them most if you have an access bond. Firstly, if you have paid money into your home loan over and above the minimum balances due, you can draw on these funds as and when the need arises. Secondly, as your home appreciates in value, this extra value can be converted to cash.

These funds courtesy of your home loan, which can be available to you almost immediately depending on how your access bond is set up, can be used to solve a crisis or to finance another purchase, such as a vehicle. Since the interest rate on your home loan is likely to be far more favourable than that which a bank would offer you on a short-term loan or for vehicle finance, this is often a practical and smart way to make other big purchases.

Is every bond an access bond? How can I get an access bond?

Once your home loan is in place, you will need to apply to the bank to have the access bond facility activated. In its "default settings", a home loan is not an access bond. This facility can usually be activated at any stage during the duration of your loan, provided that you have faithfully made your payments and not been placed under debt review. If you have entered into a home loan jointly with your spouse or partner, both parties will have to speak to the bank in order to have this facility activated. Some banks offer different options with regard to access bonds, so make sure you specify which one you want activated.

What are the different types of access bonds available?

Every bank has a slightly different option when it comes to access bonds. With Absa's FlexiReserve facility, you can access any money that you have paid into your bond over and above the minimum amounts due. This gives you all the benefits of reduced interest charged on your loan, with full access to that extra money whenever you need it.

First National Bank offers a variety of services and access-related facilities on your bond, such as the ability to access prepaid funds on your home loan electronically, or to register a bond for a greater amount than you require, creating a surplus that you can use later.

Nedbank's flexible access bond options include the NedRevolve facility, which allows you to quickly access funds if you have paid more than your minimum monthly instalments. With the Readvance option, you can access a portion of the principal debt that you have already paid off.

With Standard Bank, you have the option of whether the additional money that you pay into your home loan is used to lower your monthly payments, or to bring forward that great day when your loan is paid off and your home is all yours.

Whichever financial institution your home loan is with - whether or not it is with one of the financial institutions mentioned above - all the information about access bonds will be available on the bank's website or by speaking to one of their consultants.

Before you get to the stage of bond applications and access bonds, the first step is to find the perfect property for you and your family. The Jawitz Properties team continues to work through this lockdown period and is on hand to answer questions that you may have. Contact us for more information about property searches, getting pre-qualified, access bonds and everything else on the road to your new home.