By Iona Minton

The access bond has to be one of the most useful products to come out of the money game since credit cards. In the past, if you needed to borrow more money against your home, you would have to apply for a second bond or increase your loan amount. Now you simply instruct the bank to deposit money into your cheque account and it’s there within 24 hours.

However, this advantage can also turn into a huge problem. Your bond rate is usually lower than the cost of using a credit card or entering into a car lease. Annual interest rates for bonds are cheaper because your home represents excellent collateral.

If you have built up equity in your home and then need a loan, generally speaking, it is a good idea to use this facility to finance major purchases. But beware, if you finance a motor vehicle you should calculate what the payment would be to settle it in three years, then pay that amount into your bond each month. Otherwise you could find yourself still paying for a car that you’ve consigned to the scrap heap.

So, while having quick and easy access to your home-loan finance can be a benefit, there are some major pitfalls.

If you use the capital to finance jaunts to the Maldives or to pay school fees, you may never actually own your home or, worse still, end up owing the bank more money than your home is worth. This has actually happened to a number of homeowners two or three years ago when interest rates went sky high and property prices went down. Partly because of that, the banks now levy a 1% interest penalty on your bond if it exceeds 80% of the value of your home. This is to discourage people from dipping too far into the equity by borrowing 100% of the property’s value.

Along a similar line, you can also now get flexible credit car-loans, but you can only pay in extra money to reduce your interest costs. Obviously very few cars appreciate in value like a home, so banks won’t let you re-borrow that cash.

Those of you who have been following my advice and suggestions will understand that I have just described a means to an end. The objective is to own your home and cars debt-free, and the sooner the better. So ladies, when your husband suggests using the access bond to buy his Ferrari, tell him to check out the scale model versions instead!