Yet another useful tool in your property investment toolbox…
Your access bond is a great way to save money and build up reserves for an emergency fund. You are earning the interest that is charged on your home loan on any money that is paid into your access bond account, which is usually much more than you would earn on any other fixed deposit account or even other investments.
The great thing about an access bond is that any money you pay into your bond is seen as a loan repayment, which reduces the interest charged since a smaller capital amount is now outstanding. This either reduces the monthly bond payment, or you can ask the bank to keep the payment the same, which will then result in the bond being paid off quicker as a larger portion of the bond payment is now allocated to capital instead of interest. The difference with an access bond is that any additional money you paid into your bond, you can access again when needed.
I always try and obtain a 100% loan from the bank when purchasing a property. I do this even if I have funds to put a deposit down. I do this because I can always pay those funds I had available into my access bond after the bond has been registered. It will have the exact same effect as putting down a deposit beforehand. The only difference now is that I have those funds available for future requirements or investments if needed.
There are four things you can do with the additional money you pay into your access bond:
- You can leave the funds in there to build up your reserve fund to healthy levels in case of emergencies or changes in the economic climate.
- You can use the funds to cover your monthly shortfalls, so you don’t have to pay shortfalls from your pocket.
- You can use the funds to expand your property portfolio and cover the costs, such as transfer fees, as well as deposits (if needed) required to acquire more investment property; and
- You can use the funds for your enjoyment if your reserves are healthy.