Buying a home in South Africa is one of the most significant financial decisions many people make. Whether you’re a first-time buyer or a seasoned homeowner, your mortgage (also known locally as a home loan) is likely to be your largest long-term debt. Understanding how mortgage interest works — and how to pay less of it — can help you save hundreds of thousands of rand over time.

Here’s a breakdown of how home loan interest works in South Africa and how simply contributing more each month can drastically reduce your repayment period and interest paid.

Understanding Mortgage Interest in South Africa

Most South African mortgages operate on a variable interest rate, typically linked to the prime lending rate, which is influenced by the South African Reserve Bank’s repo rate. As of May 2025, prime hovers around 11.00%, but this rate fluctuates with economic conditions.

When you take out a 20-year bond, your monthly repayments are split into two components:

1. Capital (Principal) – The actual loan amount; and
2. Interest – The bank’s fee for lending you the money.

In the early years of the loan, the majority of your monthly instalment goes toward interest, not the principal. This is why many homeowners feel like they’re paying for years without reducing their loan balance much.

The Trick to Paying Less Interest: Pay More Monthly

One of the most effective strategies to reduce the total interest paid and shorten your loan term is to pay more than the required monthly instalment (or, use your 13^th check bonus to pay a 13^th instalment in the same year!)

Let’s look at an example:

• Loan amount: R1,500,000
• Interest rate: 11.00%
• Loan term: 20 years
• Monthly repayment: ± R15,500

If you simply add R2,000 extra per month:

• New monthly payment: R17,500
• You could pay off your bond in just over 15 years instead of 20.
• Total savings on interest: Over R700,000

The reason this works so well is amortised compound interest — the faster you reduce the principal, the less interest you accrue.

Tips for Paying Off Your Mortgage Faster

1. Round up your repayments: If your instalment is R16,200, round up to R17,000 or R18,000;
2. Make lump-sum payments: Use annual bonuses, tax returns, or any windfalls to knock down your loan balance;
3. Increase payments with salary increases: Each time your income grows, consider increasing your bond contribution;
4. Avoid taking a payment holiday: Even if your bank offers this flexibility, it prolongs your loan and increases the interest you’ll pay; and
5. Use access bonds wisely: South African banks allow you to redraw extra payments in an emergency — but don’t make a habit of it.

Final Thoughts

While South African interest rates can be daunting, especially in high-rate environments, the key to saving money lies in proactive, disciplined financial behaviour. By contributing just a little more each month to your home loan, you reduce the capital faster, slash years off your repayment term, and save a small fortune in interest.

A mortgage doesn’t have to be a 20-year sentence — with a little extra effort, you can turn it into a shorter-term commitment and enjoy true financial freedom much sooner.

Thinking of buying property or refinancing your existing bond? Always consult with a bond originator or mortgage broker to explore the best repayment strategies for your financial goals.

Use a reputable mortgage broker

Using a reputable broker will ensure you get more value out of this free service – including the full-scale service, professional advice, utmost confidentiality and respect with your personal information, speedy approvals and priority with banks.

Phoenix Bonds is a premium mortgage broker in South Africa, with a proven track record (check out the reviews on Google).  For expert advice and personalised service, fill in your details HERE and one of our experienced Consultants will be in touch.