What is a access bond?

Like people all over the world, South Africans are always looking for ways to save money on their home purchases. Looking for the best deals on price and negotiating the most favorable rates are, of course, standard practices for most would-be home buyers. Proper research and patience in the negotiation process can pay off for the home buyer who is willing to put in the effort, but even those practices pale in comparison to the benefits that can be obtained through the use of an access bond.

What it is

An access bond is a type of mortgage account that provides the home buyer with a great degree of flexibility in the way he or she manages money and payments. Most people who use access bonds simply have their salary checks deposited directly into their bond account. While there, the money lowers the mortgage’s outstanding balance, which then lowers the daily accrual of interest on the mortgage – thereby lowering the overall cost of the mortgage over time and allowing for earlier retirement of the debt while still allowing you access to the money in times of need.

The advantages

The obvious advantage in lowering daily interest costs is but one of the reasons for using an access bond. It is also advantageous to have those additional funds in the account when you need to cover various living expenses. When a large debt suddenly rears its ugly head, you could take out an equity bond using your home as collateral – but you might simply be adding yet another monthly payment to your budget. An access bond allows you to withdraw funds from your bond account, and often at a lesser amount of interest than a standard equity bond would require.

Disadvantages of access bonds

Not everything about an access bond is attractive, however. For instance, any money used out of the account is based on using the home or other property as collateral – and each withdrawal that you make does reduce your overall equity in the property. While this may not seem like a concern at the time the funds are needed, it can become much more important in the event that you decide to sell the property. In addition, your access bond needs to be repaid in its entirety should you ever try to sell the home. This is not a problem for most home owners during most years, but can become one in those periods when home values fall.

Obtaining an access bond can be accomplished at the time you take out your mortgage, or after the fact. You should know, however, that most banks have differing standards now as to what qualifications you need to obtain an access bond. The economic downturn and credit crunch have forced heavier restrictions in most areas of the banking industry, and access bonds are no exception. If you qualify, however, you should consider obtaining an access bond as it is one of the best ways to manage not only your mortgage payments and balance, but your excess cash as well.