Bond maths, plainly
What a 20-year bond actually costs
The monthly repayment quoted on a bond application is the easy number. The number that matters — and the one most people underestimate — is the total cost over the bond term. On a R1.5m bond at 11.75% over 20 years, the monthly is about R16,250 — but you end up paying back R3.9m. R2.4m of that is interest.
The amortisation curve
Same maths as any other loan — the amortisation formula. Each monthly instalment is calculated to bring the outstanding bond to zero over the full term. Early instalments are mostly interest because the bond is large. Late instalments are mostly capital because the bond is small.
On the R1.5m / 11.75% / 20-year example, your first instalment of R16,250 is roughly R14,700 interest and R1,550 capital. The last instalment in year 20 is roughly R160 interest and R16,090 capital. That’s the curve — heavily interest-weighted up front, capital-weighted at the end.
The once-off costs you don’t see in the calculator
Registering a bond costs real money up front. Before you get to month one, you typically pay:
- Bond registration fees — paid to the bond attorney appointed by the bank. Scaled to the bond amount, governed by the Legal Practice Council’s recommended tariff.
- Bond initiation fee — once-off bank fee, capped under the National Credit Act. Often capitalised into the bond (you pay interest on it for 20 years) unless you settle it separately.
- Transfer attorney fees — paid to the transfer attorney appointed by the seller. Also scaled to purchase price, also tariff-based.
- Transfer duty — tax payable to SARS on most property purchases above the SARS threshold. Sliding scale, on the current schedule at sars.gov.za. New builds from a VAT-registered developer are typically exempt (the 15% VAT is in the price).
- Deeds Office fees — modest, scaled by bond amount.
For a R1.5m purchase, these once-offs typically come to R50,000–R150,000 depending on whether transfer duty applies. Plan for them; many first-time buyers underestimate by exactly this amount.
Prime-linked vs fixed-rate bonds
Two ways an SA bond can be priced.
- Prime-linked — the SA default. Your rate is set as prime ± a margin. Prime moves when the SARB hikes or cuts the repo rate. Pro: when rates drop, your instalment drops automatically. Con: when rates rise, your instalment rises automatically.
- Fixed rate — locked for an agreed period (typically 24–60 months). Pro: predictable. Con: the bank prices fixed rates higher than prime-linked to compensate for the risk. Usually worse value unless you specifically need stability for budgeting reasons.
For most SA bonds, prime-linked is the default and the right call. The exception: short stretches when rates are clearly on the way up and locking in something below the expected peak makes sense.
The stress-test
Before signing a 20-year bond, plug an interest rate 2 percentage points higher than today’s into the calculator above. On the R1.5m / 20-year example, going from 11.75% to 13.75% bumps the monthly from R16,250 to R18,400 — R2,150 more per month.
If that higher number still fits your budget comfortably, the bond is the right size. If it’s tight, the bond is too big — you’re betting on rates not rising, which is a bad bet to make on a 20-year commitment.
20 + extras vs 15 — the real comparison
A 15-year bond has a higher monthly instalment but saves substantial interest. Same R1.5m at 11.75%:
- 20-year: ~R16,250/month, ~R2.4m interest.
- 15-year: ~R17,750/month, ~R1.7m interest. R1,500/month more, R700k less interest.
The smart play is 20-year bond, pay R1,500 extra a month. You hit the same payoff trajectory as the 15-year while keeping the contractual minimum at R16,250 — so when an emergency hits or income drops, you can fall back without the bank reposessing. Use the Loan Payoff Calculator to model extra-payment scenarios on your specific bond.