The refinance maths
Is switching your bond actually worth it?
SA bond refinancing is one of those decisions that looks obvious in marketing material and gets nuanced fast in real life. Lower rate sounds great. Lower rate minus R50,000 of switching costs minus a 90-day notice penalty minus a reset 20-year term sometimes doesn’t. The calculator above puts the actual numbers on one screen.
The break-even framing
The right question isn’t “is the new rate lower?” — it’s how long until the monthly saving pays back the switching costs? If your break-even is at month 36 and you plan to stay in the house for 10+ years, refinancing is clearly worth it. If your break-even is at month 96 and you might sell in 3 years, it isn’t.
Example. Current bond: R1.2m outstanding, 12.25% rate, 15 years remaining → ~R14,500/month. New offer: 11.25%, fresh 20-year term → ~R12,650/month if you accept the longer term. Monthly saving: R1,850. Switching costs: R60,000. Break-even: R60,000 ÷ R1,850 ≈ 33 months.
But — and this is the catch — the new bond runs for 240 months not 180. You pay an extra 5 years of interest on the new schedule. The lifetime maths can flip even with a shorter break-even on switching costs.
The switching-cost components
What “switching costs” actually includes in SA:
- Bond cancellation at the old bank — a small admin fee plus the attorney’s cost of lodging the cancellation at the Deeds Office.
- 90-day notice penalty if you didn’t give the notice — interest on the outstanding balance for the remaining notice period. Avoidable by giving notice early.
- Bond initiation fee at the new bank — NCA-capped, often capitalised into the new bond. Same fee a new home-buyer would pay.
- Registration attorney fees at the new bank — to register the new bond at the Deeds Office. Tariff-based, scaled to bond amount.
- Deeds Office fees — modest, scaled by bond amount.
Total: R30,000–R80,000 on a typical bond. Get a written quote from the new bank or refinancing broker covering all of these before committing — the headline “free switch” promotions some banks run usually cover only one or two of these components.
The negotiate-first move
The single highest-return move in SA bond refinancing isn’t actually refinancing. It’s using a competing offer as leverage with your current bank.
- Get a formal written quote from a new bank or a refinancing broker (Ooba, BetterBond, etc.).
- Take it to your current bank’s home-loans team. Ask whether they’ll match the rate.
- Many banks will. They’d rather keep an existing paying customer than lose to a competitor. No switching costs, no new attorney’s fees, no notice penalty.
Even if they match only partially, you’ve gained something for an hour’s work and a phone call. Worth doing every 24–36 months as a check-in.
Equity-release refinancing — handle with care
A common pitch: refinance to a bigger bond, get the difference as cash. Use cases that work:
- Renovations that demonstrably add property value — at bond rates instead of personal-loan rates, the maths often supports it.
- Productive business investment with a clear, quantified return that beats the bond’s effective cost.
- Consolidating higher-rate debt (credit cards, personal loans) into the bond rate — but only if you simultaneously close the high-rate accounts so you don’t rebuild the debt.
Use cases that don’t work: holidays, cars, consumption. Funding short-term spending with 20-year debt at bond interest rates is one of the worst trades in personal finance. It looks easy because the monthly is small. The total cost is enormous.
When NOT to refinance
- You’re likely to sell the property within 3–5 years. Switching costs won’t recoup.
- The rate improvement is small (under 0.5%) and switching costs are full. Break-even will be too far out.
- Your credit score has deteriorated since the original bond. You may be quoted worse than your existing rate, not better.
- Your current bank will match. Negotiate first; switch only if they won’t.