Regardless of where you are on your property investment journey, paying off your home loan faster is a strategic move that can transform your financial outlook. But this is no simple thing to achieve.
“Real estate investments require a substantial capital outlay, which is why many rely on home finance to turn their home ownership dreams into reality,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
“Those who are strategic about their property purchases can own property debt-free much sooner than those who fail to consider how to make this happen,” notes Adrian.
To help homeowners develop a strategy that could help them reach an early bond settlement, RE/MAX of Southern Africa explores some of the options for different types of property owners:
First-time homebuyers
It is advisable to get into the property market as soon possible rather than delaying the purchase until you can afford your forever home. Purchase an affordable entry-level home that will appreciate in value over time and that you know you can afford to pay off faster. Over time, the house price appreciation combined with the equity that you’ve built up by adding to your repayments can then serve as a steppingstone towards upgrading to your dream home without needing to take on additional debt.
Repeat homeowners
For those who are already on their second or third home, the best way to achieve debt-free homeownership is to focus on ways to make extra repayments on the home loan. Make use of any unexpected windfalls, like a cash-back from a tax return, your annual bonus, or an unexpected inheritance. Allocate this money, whether it's all or just part of it, to your home loan and watch the outstanding balance and the interest charges diminish. Find ways to make the property work for you by hosting short-term rentals on your guest room(s) during peak travel and vacation seasons (for those who live in holiday/touristy suburbs); or set up a long-term rental for a section of your home (if your property allows for it). Either way, this additional income added to your bond could be a game-changer.
Real estate investors
For those who have purchased an investment property through home finance, it is important to understand that the potential rental income is likely to only help investors to break even on the monthly repayments for the property. Paying off the home loan faster will mean greater profits from the rental income. For those starting out, it is better to choose an affordable property where the rental income has the potential to cover most (if not all) of the monthly expenses (including rates and taxes levies, etc.) of the property so that the investor can focus on making extra payments on the loan. The faster the loan is paid, the quicker the investor can enjoy pure profit on the property.
“Paying off your home loan faster is a prudent financial decision that offers various advantages, including interest savings, reduced financial risk, and increased return on investment. By implementing tailored strategies that take your unique circumstances into account, you can accelerate your journey to debt-free property ownership. Remember, every little bit counts because it all adds to your long-term financial well-being, moving you to a brighter future in the real estate market,” Goslett concludes.
Writer: Kayla Ferguson