Paying bond quickly

[simonjandrews2]

Hi all

Bought an apartment that I live in for 1M in June 2022. Currently I have 750k left to pay. I will get another lump sum bonus shortly which I was planning to put in taking the amount owed to 400k. At this rate it will be paid off in 4 years. Is this the correct thing to do? Should I rather be paying it off slowly and investing elsewhere

Other info - additional savings and investments monthly of 40-50k (mainly S&P); TFSA maxed.

 

[gemini_x]

@simonjandrews2 These are the problems most people dream of.

 

[boateng]

@simonjandrews2 I hate debt, It plays on my mind and effects me.
I've been in the same boat as you and personally I chose to pay off the home (and keep the money accessible in the accessible bond).

I don't mind losing a few % as the peace of mind not having that debt weigh on me is worth it.

 

[simonjandrews2]

@boateng That’s me too. I hate seeing that I owe money. But i am scared I am putting too many eggs in one basket

 

[renaissance]

@simonjandrews2 Depends what type of bond you have - If its an access bond then yes as you be effectivly earning the same interest as your bond

Then you could leave your repayments as they currently are and always have access to those additional funds you put into the bond. I did this and used it as my loan account which funded cars and university fees for my kids.

I could have paid my bond off 5 times over but always kept it so i didn't have to go begging for finance at the bank.

Or

You can tell them to reduce your monthly payments, take that saving and start building your TFSA portfolio. In 14 years time when you have 0.5 bar in a good interest bearing account that is tax free you be very happy. Say by then lets say a TFSA is paying 10% per year in Int = 50K plus your 26K tax free interest allocation means you earning 76K per year tax free.

Lots of places to put your extra cash, but make always make sure its as tax proof as possible and secure its groweth - I always say if it can double evry 5 years its doing very well.

And at the risk of getting flamed there is also the crypto market - thingas areally heating up now - I just dumped 1.0 Mil into BTC and will hold for 5 years - If it goes where i think it will go i will also be smiling

 

[simonjandrews2]

@renaissance Full access bond. TFSA maxed and thankfully too young for kids and those expenses for now

 

[desertjim74]

@simonjandrews2 I have no idea if this is right or wrong advice, or if it even applies, but my inner voice, says that you really should not put all your eggs into 1 basket, if you can afford to pay off the bond, maybe put 30% of the bonus into the house, and 70% into something that will attract growth, a unit trust, but putting it all into the house, that if you want, you can sell tomorrow and close the bond..

That to me makes more sense, you have the option to sell the house, but if you sink all your cash into the house, what if.. And that is where I get worried, IF is a huge word.. If.. what if..

 

[emmanuel12]

@simonjandrews2 Sounds like you doing really well. I would definitely get the bond finished first considering we don't really have any reduced interests rates like in some other countries, bonds are relatively expensive here and you will find it hard to get more for your money elsewhere.

 

[heythereterry]

@simonjandrews2 I'm not a financial advisor (I feel like I have to say that ) - I see you are using the TFSA - are you also using the maximum deduction you can for an RA to save on income tax? Although its obviously good to pay off the bond sooner, you are making lightning progress paying off over half of the bond in 2 years. Well done.

 

[boateng]

@simonjandrews2 with 40k savings per month I don't think you should worry about that too much. just make sure you're investing in dollar or euro based funds. Don't keep your money in rands.

 

[schong]

@simonjandrews2 How much of your net worth is in SA? I would put 30% in house and the rest in US Stock Market, VOO, S&P500 and start protecting your self from the rands deflation.