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    HOW EXTRA payments AFFECT YOUR HOME LOAN

    Oct 18, 2020 5 minutes

    If you are confused about how advance payments to your home loan work, you are not alone. With lockdown, many people are checking their finance agreements in an effort to take control of their finances. This has resulted in many queries to City Press about what happens when you pay an additional amount into a home loan.

    Most home loans are structured as an access bond, which means that, when you pay in extra money, it reduces the interest you pay on your mortgage and also leaves funds available for you to withdraw. For example, some people use this facility to save up to pay annual school fees as a lump sum, but many pay in extra to settle their home loan sooner.

    Customers get confused about how amortisation works and how additional payments are used to reduce a home loan. It is important to understand how your bank facility treats additional payments.

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