How bond repayments are calculated
South African home loans are amortising loans: you pay the same instalment every month (while the rate stays the same), and each instalment covers that month’s interest plus some capital. Early on most of your payment is interest; towards the end most of it is capital.
The formula
Monthly rate r = annual rate ÷ 12 Repayment = loan × r ÷ (1 − (1 + r)^−months) Total interest = repayment × months − loan
Interest is calculated monthly on the outstanding balance, which is how South African banks calculate home loan interest (banks compute it daily, which makes a difference of only a few rand).
Before you apply
- Deposit: a deposit of 10% or more usually gets you a better rate and lower total interest.
- Upfront costs: budget separately for transfer duty, transfer attorney fees and bond registration costs.
- Rate risk: a 1% increase in prime adds hundreds of rand a month to a typical bond — check the rate table above before committing.
Worked examples
R1.5 million home with a 10% deposit at prime
Borrowing R1 350 000 over 20 years at 10.75% costs R13 705.59 a month. Over the full term you pay about R1.94 million in interest — more than the loan itself.
Your bond
- Purchase price
- R1 500 000.00
- Deposit10% of the price
- R150 000.00
- Loan amount
- R1 350 000.00
- Total interest over the term
- R1 939 341.81
- Total cost of the property (deposit + repayments)Excludes transfer duty, attorney fees, insurance and rates
- R3 439 341.81
The same bond with R1 000 extra a month
An extra R1 000 a month pays the bond off years sooner and saves a large share of the interest.
Your bond
- Purchase price
- R1 500 000.00
- Deposit10% of the price
- R150 000.00
- Loan amount
- R1 350 000.00
- Total interest over the term
- R1 939 341.81
- Total cost of the property (deposit + repayments)Excludes transfer duty, attorney fees, insurance and rates
- R3 439 341.81
R2.2 million on a 30-year term
A longer term lowers the monthly repayment but significantly increases the total interest paid.
Your bond
- Purchase price
- R2 200 000.00
- Deposit0% of the price
- R0.00
- Loan amount
- R2 200 000.00
- Total interest over the term
- R5 193 172.39
- Total cost of the property (deposit + repayments)Excludes transfer duty, attorney fees, insurance and rates
- R7 393 172.39
Frequently asked questions
What interest rate should I use?
Start with the prime lending rate (currently 10.75%). Banks quote home loans as prime plus or minus a margin, depending on your credit record, income and deposit. First-time buyers with no deposit often pay prime or slightly above.
How much bond can I afford?
Banks generally keep the repayment to about 30% of your gross monthly household income, and also assess your other debt and living costs. Enter your income in the optional field for a quick check, or use the property affordability calculator.
Why does a small extra payment make such a difference?
Interest is charged on the outstanding balance each month. Extra payments reduce the balance immediately, so every following month is charged less interest — the saving compounds over the remaining term.
Does this include bond registration, insurance or bank fees?
No. The repayment covers capital and interest only. Banks add a monthly service fee and require building insurance, and most require life cover. Bond registration and transfer costs are paid upfront.
What happens when the prime rate changes?
Most South African home loans have a variable rate linked to prime, so your repayment changes when the Reserve Bank moves the repo rate. Use the rate comparison to see the effect of a 1% change.