Is it a Good Idea to Pay Off your Bond?
With so little outstanding on my bond, I'm trying to decide whether to pay the bond off or keep my options open.
12/02/2020
After many years of living under the mantle of paying off a bond, I have reached the stage where there is very little left outstanding. This brings me to the choice of paying off the remaining outstanding amount or keeping my options open for the future.
Home loans can swallow up a large percentage of anyone's monthly income, and finally reaching the stage where there is very little left to pay is definitely a pleasant thought. To not have to worry about paying the bond every month and have some extra cash for other luxuries. Oh, what a pleasure!
However, paying off a bond to be free of that monthly payment is not always a sensible choice and not necessarily the best course of action for several reasons.
"It isn't always in your favour to be 'house rich and cash poor' - especially when you have the option for easy access to funds for the upkeep, improvement and maintenance of a property"
- Easy Access to Funds
One aspect of keeping your bond active, especially if you owe a small amount, is that you have easy access to funds in the event that you want to borrow money. While you might not necessarily need the funds to improve your home, there's still always the possibility that you need to pay for education, finance your business, or plan for the holiday of a lifetime. Keeping your bond active means that you have the ability to borrow funds against your home equity.
When you consider that the interest charged on a bond is much lower than that of a personal loan or other types of financing, it makes a lot of sense to retain some access to an easy way to obtain funding against future projects - especially if the amount outstanding is small.
It makes sense to have easy access to funds should your house require improvements or renovations.
- Money for Home Improvements
If you have reached the stage of almost paying off your home loan, another reason you may wish to keep the bond account open is to tackle much-needed home improvements or renovations. Once again, having access to funds to do any work on your home, at a reasonable interest rate, is definitely in your favour. Home improvements that offer a good return on your investment will only add more value to your home.
adapted via article on property24