Here's why you need an access bond

One of the best financial moves you can make as a homebuyer is to ensure that you have a home loan with an access facility, so that you can deposit surplus funds into your bond account at any time, or gain immediate access to the equity that you build up in your home if you need it. 

So says Gerhard Kotzé, CEO of the RealNet property group, who explains that while all the major banks offer these facilities, many property buyers are not really sure how they work, or how beneficial they can be. 

"For a start, access bonds are like super savings accounts for homeowners. Any additional money you deposit into your access bond account will effectively earn interest - tax free - at whatever your current home loan interest rate is. This will usually be substantially higher than the interest rate that would apply to an ordinary savings account.

"And on top of that, these additional funds will be helping to shorten the term of your bond, and reducing the overall cost of your home. For example, if you were to pay just R500 month extra on a 20-year home loan of R1m, you would shorten the loan term by almost three years, and reduce the total cost of your home by almost R300 000."

On the other hand, he says, an access bond gives you peace of mind knowing that you can immediately withdraw the "savings" in your bond account should you need to do so. 

"You might need cash for a medical emergency, or perhaps to pay university fees instead of your child having to obtain a student loan. 

"An access bond also provides a convenient way to finance home improvements or renovations. Instead of taking out a separate loan, you can utilise the equity in your property to fund these projects.This can be cost-effective, as the interest rates on home loans are lower than those on personal loans or credit cards."

Kotzé says you can also use funds accumulated in an access bond to help pay for investments in other properties, stocks, assets or even a business. 

"In addition, people do sometimes use the savings built up in an access bond to pay off other, higher-interest debts such as personal loans or credit card debt or even a car, and so consolidate their financial obligations. But this can be risky, and requires borrowers to be very disciplined about not incurring any additional debt, and rebuilding their access bond savings as soon as possible.

"In fact, we always advise homeowners who are considering such a move to first consult a mortgage specialist who can fully explain the implications and how it might affect their specific financial situation and goals."