Question:
If I wanted to buy a property for R2-million and could pay cash, is that the best way to buy the property?

Is it good to have a small bond of, say, R100 000 or would the interest payments make it not worth my while?

Answer:
It depends what your objectives are. If, for example, you are just starting out and the R2-million was a windfall and you have no credit record to speak of then getting a bond over five years would help you build up a profile.

On the other hand, if you are established and have the cash free to buy the house then there would be little point in taking a bond.

The exception to this is if you will need to finance items in the future. Using the access facility on your bond is a cheap way to finance, especially if you have so much equity in the property. If you take out a R100 000 bond on a R2-million property you will get a very good interest rate.

Just for the record, a R100 000 bond will cost you R1202 per month over 20 years. The total interest you would pay is R189 000. If you took the bond over five years your repayment would be R2300 per month and the interest on this would be R38 000.

If you intend renting out the house the interest of a bond can be offset against the rental income, so you would get a little tax relief there.