Ridwan asks: I have been told that by splitting my monthly installment into two payments over the month, for example the 15th and the 30th of the month, I can save on interest as interest is calculated daily so the payment on the 15th reduces the capital outstanding for 15 days until the interest amount for the month becomes payable on the 31st. I was wondering if you could perhaps elaborate a bit on this option and advise whether our local South African banks actually offer this option or not.
You can certainly enter into this arrangement but remember that you only gain if the payment on the 15th is an EARLY payment; in other words, if your bond repayment is due on the 30th then if you pay half of it on the 15th and then the next half on the 30th, you will benefit from the interest saving. But most people don’t necessarily have half of their mortgage payment available to them already by the 15th of the month. If you only pay half on the 30th and the next half on the 15th of the following month, then you would be paying more interest.
Another way to cut interest is to arrange for your bond payment to go off automatically the day after payday rather than at the end of the month.