paying off interest first

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2007-11-23 00:52:20

nafi

Real Estate Information

Paying back a bond

I don't quite understand what you propose to do. I am guessing that you want to withdraw the principal amount from an existing R400 000 mortgage bond (which provides you with the option to withdraw the principal) and then repay only the interest monthly, with no principal. Am I right?

Well, this might work if your bond agreement does not require you to apply for release of the principal by the mortgagor. Then you could pay the minimum monthly payment (which would include interest and principal) and then just withdraw the principal you just paid.

But paying only the interest, without regard for the minimum payments required by the mortgagor would land you in trouble quite quickly, IMO.

I must say that I don't understand why you would want to repay interest only for only 2 years. It would make more sense if you told me you wanted to do so for 10 years. I mean, the principal amount you would be repaying every month after 2 years would be negligible anyway!

I'd rather pay the minimum monthly repayments and then periodically (every year or two or five), withdraw the accumulated principal.

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