You are Here > Home > YouTube Channel > Video: Pay back that payment holiday

Video: Pay back that payment holiday

Sep 1, 2020

We’ve seen many financial institutions offer their customers a debt payment holiday during these trying times. And while it may seem like a welcome relief, be careful because it might end up costing you a lot more than you realize.

According to the Old Mutual Savings and Investment Monitor, 35% of people surveyed had taken a debt repayment holiday on their home loan. While this might seem like a good option, especially if your income has been affected during the national lockdown, it will add significantly to the length of the loan.

According to Nedbank, if you were five years into your repayment and took a three-month payment holiday on a R1 million home loan, it would extend your home loan by an additional 14 months and you would pay R106 000 in additional interest.

You must plan to increase your repayments once your salary recovers, so that you can still pay off your home loan in the original time frame and save on interest. In order to do this, in 12 months’ time increase your mortgage repayments by 5%.

For example if your repayment is R10 000, increase it to R10 500 a month. If you cannot afford to do that, at least increase your repayment by one percent each year, which in this case is an increase of just R100 a month.

Remember to increase that every year. You can do this by simply depositing the additional amount into your bond account monthly or request the bank to increase the amount of your monthly debit order.

Remember that a payment holiday is like a normal holiday: it ends up costing a lot of money. Only take this option if you really cannot meet those repayments.

1 Comment

  1. Hi Maya,

    I am looking to buy a car, I wanted my repayment term to be 36 months but I was advised by the dealership that the bank will charge me a higher interest if I opt for a smaller repayment period instead of the 60 or 72 is this true?

    Can I look for my own financing or is the responsibility on the dealer?

    Reply

Submit a Comment

Your email address will not be published. Required fields are marked *

Maya Fisher-French author of Money Questions Answered

Previous Articles

Video: Marriage and money

When couples marry, including Customary Marriage, they will automatically be married under community of property, unless they sign a separate antenuptial contract. This is seen as a way to protect women, especially those who stay at home to raise the family. The term...

Video: Your money behaviour

Have you ever wondered how your money behaviour compares to that of your peers? Where do they save? What do they spend their money on and how much debt do they have? On this edition of Money Matters, we chat to Akash Dowra, Head of Client Insights at Discovery Bank,...

Video: Five tax myths

Many employees don't understand the complex tax calculations made by their companies and they often question these deductions. According to tax specialist Tanya Tosen, there are five key things an employee needs to understand when it comes to their tax. Myth one:...

Struggling with car debt? Take action now!

According to the Experian Consumer Default Index, repayment of car debt has shown a marked deterioration as the extended Covid-19 lockdown puts South Africans under more financial pressure. Marc Friedman, CEO of car sale platform Weelee.co.za says that to avoid a...

Video: Money is different for women

Did you know that 80% of women will manage their own finances during their lifetime, either because they have remained single, gotten divorced, or been widowed? And the reality is that money and finances are different for women. Why? We know from South African salary...

Video: How to change your money habits

We know from studying history, that entire generations can share a similar money attitude or behaviour based on a major financial event that their generation experienced. People who grew up during the great depression of the 1930s, and those who grew up during World...

Treasury says “no” to pension loan proposal

National Treasury has made it clear that it does not support any calls to allow members to borrow money from their pension funds. This was in response to a Private Member’s Bill to amend the Pension Funds Act. This Bill was put forward by DA MP Dr Dion George as a...

Video: The true cost of a fancy car

The decision on how much to spend when purchasing your car is possibly one of your most important financial decisions. In fact, banks say that the main reason they turn down home loan applications is due to affordability, and the main culprit is usually car finance....

Video: Set goals for money success

The key to achieving our money goals is to use psychology to set us up for success. When it comes to our money goals, behavioural economist Erik Vermeulen says we need to set specific long-term goals, but also have built-in intermediate success measures to make our...

Video: Investing in bitcoin

Whenever we see a surge in the price of bitcoin, I get a lot of queries from people asking how they can invest. The problem is that people are lured by the prospect of high returns rather than actually understanding what they are investing in. A sure way of telling...

Pin It on Pinterest

Share This