A home loan is the cheapest form of debt and as far as possible, we should be using our home loans for our most important needs. Personal loans are among the most expensive forms of debt and we should all be shying away from personal loans.
 
So the question is; why are we Not using our home loans for everything? The simple answer is lack of knowledge and also we have to understand that banks are in the business of making money out of interest so they will do their level best to give you the most expensive form of debt. If people really understood interest rates, they would keep away from all unsecured debt and most would use their home loans for everything, including buying their cars using their home loans.
 
In this interview https://soundcloud.com/user-768186920/heart-to-heart-22-apr-how-to-use-your-home-loan-as-your-personal-bank, we address the following;

1. How can one use their home loan as their own personal bank? What does this even mean?

Use your home loan to;

• Use it to borrow money to renovate your home to increase the value of your home- as long as you don’t overcapitalise
• Use it to pay university fees
• Use it to build back rooms so you can earn extra rental income
• Use it to pay off debt, where necessary but don’t get into unnecessary consumer debt because you should not do this too often
• Buy your car, if you can and if you want – if the interest rate on your car would be much higher than what you are paying on your home loan
• Use it to even buy a 2^nd investment property wherever possible
• BUT MAKE SURE YOUR HOME LOAN IS PAID UP AT LEAST 2 YEARS BEFORE RETIREMENT
• Do NOT take your title deed from the bank if you pay off your home loan before retirement age – do NOT close the account. Tell your bank to keep it open

2. Why would should anyone do this? is it not risky?
   • Not everyone is at risk of losing their jobs e.g. civil servants and some professional jobs
   • What is more risky is using high interest loans for things that you could have used your home loan for, at a much cheaper rate of interest

3. Can you give us a practical example of where this has worked?

I wish to share at a high level the story of a customer who went under debt review, fortunately he is out now. He has improved his credit score. He wrote to us to say he is worried he is sliding back to debt again. I was not surprised because many people tend to get in and out of debt all the time. but when he told he has a PAID UP home and paid up car yet he is paying over R9000 for short term loans, I knew that he was one of thousands of South Africans who are suffering because of lack of knowledge. We will be refinancing his home so he settles the short term debts and he doesn’t have to worry about varsity fees for his first born who is going to varsity in 2022.

4. What Tips can you share with the listeners if they want to make it easy for themselves to use their homes as their personal banks?

TIPS
to be able to use your home loan as your personal bank you need the following;

• DISCIPLINE – you use this for necessities and stuff that will increase the value of your home or to pay fees for yourself or kids
• Pay more into your bond regularly by increasing your debit order at least annually, when your salary increases so you are always ahead with your home loan repayments
• Do Not use your home loan as a credit card or for consumer spending!

If you own a home and you want to borrow money against it, you can contact us at info@thuthuka-sa.co.za