Welcome to Lake Properties PROPERTY CAPE TOWN Lake Properties is a young and dynamic real estate ag

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Cape Town, Western Cape, South Africa
Lake Properties, Cape Town is a young and dynamic real estate agency located in Wynberg, Cape Town. We offer efficient and reliable service in the buying and selling of residential and commercial properties and vacant land in the Southern Suburbs including Bergvliet,Athlone,Claremont,Constantia,Diepriver,Heathfield,Kenilworth,Kenwyn,Kreupelbosch, Meadowridge,Mowbray,Newlands,Obervatory,Pinelands,Plumstead,Rondebosch, Rosebank, Tokia,Rondebosch East, Penlyn Estate, Lansdowne, Wynberg, Grassy Park, Steenberg, Retreat and surrounding areas . We also manage rental properties and secure suitably qualified tenants for property owners. Another growing extension to our portfolio of services is to find qualified buyers for business owners who want to sell businesses especially cafes, supermarkets and service stations. At Lake Properties we value our relationships with clients and aim to provide excellent service with integrity and professionalism, always acting in the best interest of both buyer and seller. Our rates are competitive without compromising quality and service. For our clients we do valuations at no charge

When is a 30 year bond more advantages than a 20 year bond.




Lake Properties

  • Monthly payment: longer term → lower monthly repayment because the same principal is spread over more months.
  • Total interest paid: longer term → much more interest paid over the life of the loan, because interest accrues for more months.
  • Equity build: shorter term → faster principal repayment, so you build equity faster with a 20-year bond.
  • Payment composition: with longer terms early payments are mostly interest; with shorter terms a larger share goes to principal earlier.

Concrete example (so the trade-off is obvious)

Example assumptions (illustrative only):
Loan amount = R1,000,000 (one million rand)
Interest rate (scenario A) = 10.00% p.a. (repayment loan)
Compare: 20-year (240 months) vs 30-year (360 months) at the same interest rate.

Using the standard mortgage formula (monthly rate = annual ÷ 12; monthly payment M = P·[r(1+r)^n]/[(1+r)^n−1]):

At 10.00% p.a.

  • 20-year (240 months):
    • Monthly payment ≈ R9,650.22
    • Total interest over life ≈ R1,316,051.95
    • Total paid (principal + interest) ≈ R2,316,051.95
  • 30-year (360 months):
    • Monthly payment ≈ R8,775.72
    • Total interest over life ≈ R2,159,257.65
    • Total paid ≈ R3,159,257.65

So: choosing 30 years saves you ≈ R874.50 per month but costs you about R843,205.70 extra in interest over the life of the loan (with the same interest rate).

If the 30-year loan also carries a slightly higher rate (common in the market), e.g. 30-year at 10.5% vs 20-year at 10%, the monthly gap shrinks and the extra interest rises even more:

  • 30-year at 10.5% → monthly ≈ R9,147.39 (so only ~R502.82 per month cheaper than the 20-yr at 10%), and total interest ≈ R2,293,061.46 (roughly R977,009.51 more than the 20-yr at 10%).

How equity and early repayments compare (same 10% example)

  • After 1 year of payments:
    • 20-year: you’ve paid down principal ≈ R16,547.38.
    • 30-year: you’ve paid down principal ≈ R5,558.79.
      So the 20-year builds ~3× more equity in year one.
  • After 5 years: principal paid ≈ R101,975.57 (20-yr) vs R34,256.80 (30-yr).

This shows how much slower principal reduction is on a 30-year bond — early years are dominated by interest.


When a 30-year bond makes sense

  1. Tight monthly cash flow / uncertain income. If your budget is tight or your income can drop (commission work, contract work, business risk), a lower monthly payment reduces default risk and stress.
  2. You’ll use the freed cash for higher-return opportunities. If you reliably invest the monthly saving and your after-tax return is higher than the mortgage interest you’re avoiding, the longer term can make sense (but this is an active investing decision and not guaranteed).
  3. You need flexibility early on — e.g., young buyers who expect income to grow, parents paying school fees, or someone building a business.
  4. You want the option to pay extra but not be forced to. A 30-yr loan lets you make small payments when cash is tight and bigger ones when you can — many people like that optionality.
  5. Short holding horizon for the property. If you plan to sell within a few years, the total-interest penalty of 30 years matters less because you won’t be on the full-term schedule.
  6. Keeping emergency cash. If choosing 20 years would drain reserves or leave you without an emergency fund, pick 30 years and keep liquidity.

When a 20-year bond is usually better

  • You can comfortably meet the higher monthly payments.
  • Your priority is paying less interest and owning the home sooner.
  • You value building equity fast (helps with future refinancing or borrowing against the property).
  • You don’t have higher-return uses for the extra monthly cash — the math often favors faster repayment.

Ways to get the best of both worlds

  • Take a 30-year repayment bond but make extra payments whenever possible. That way you keep low required payments but reduce the term when cash allows. (Check with your bank about prepayment rules/penalties.)
  • Use an offset account (if offered) or a separate savings account: keep cash close to the bond and lower interest effectively by offsetting balances.
  • Make “bonus” or yearly lump payments from raises/bonuses — many people treat their raises as a source for extra bond payments rather than more lifestyle inflation.
  • If you’re disciplined, invest the monthly saving (the R874.50 in the example) into a low-cost, diversified portfolio — but only if you’re confident about returns and risk tolerances. Compare expected after-tax returns vs mortgage rate.
  • Refinance later: start with a 30-year now for flexibility; if income and rates change, refinance into a shorter term later.

Risks & practical checks

  • Interest rate differences matter. Lenders often charge a slightly higher rate for longer terms — this reduces the monthly advantage and increases life-time interest.
  • Prepayment penalties / administration fees — check your bank’s rules before committing.
  • Behavioral risk: having a lower compulsory payment can tempt some people to spend the difference rather than save or invest it. If you’re not disciplined, a 20-year can be safer for the “forced savings” effect.
  • Inflation & income growth: if you expect inflation and rising income over decades, the real burden of a long loan falls, which can favor 30 years. But that’s contingent on future events.

Quick decision checklist

Ask yourself (honest answers):

  • Do I need the lower monthly payment now to avoid financial stress? (Yes → 30-yr looks better.)
  • Can I absorb the higher monthly payment without risking my emergency fund? (Yes → 20-yr looks better.)
  • Do I have higher-return uses for the monthly saving and the discipline to invest them? (Yes → 30-yr can make sense.)
  • Will I likely sell the property soon? (Soon → 30-yr’s extra interest matters less.)
  • Does the lender charge a higher rate for 30 years or prepayment penalties? (If yes, factor that in.)

Lake Properties Pro-Tip: If you’re unsure, pick flexibility: take the 30-year bond only if your bank allows penalty-free extra repayments (or has an offset), and then treat the mortgage like a 20-year by paying the equivalent 20-year monthly amount whenever you can. That gives you the safety of a low required payment and the option to own your home faster — without burning your emergency fund. 

If you know of anyone who is thinking of selling or buying property,please call me 

Lake Properties 

083 624 7129 

www.lakeproperties.co.za 

info@lakeproperties.co.za 

Lake Properties                     Lake Properties

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