Should You Pay Off Your Bond Faster or Invest in Stocks?

This is one of the most common questions I get from clients. “Paul, should I pay off my bond faster or rather invest in stocks?”

When it comes to repaying your bond, we’ve all heard the “secret sauce”: If you pay back a little extra every month, you can pay off your bond much faster.”

So let’s assess:

1. Is it true?

2. How much of a difference does it actually make?

3. Should we prioritise the bond or invest the money?

The short, medium, and long answer: YES, it does work - and it makes a massive difference to both your repayment term and the total interest payable over the life of the loan.

Here’s the video where we break it all down in the MoneyMoves Studio.

Important disclaimer:

Repaying Extra: The Simple Math

Let’s assume you have a R1million loan (if you have more, just multiply accordingly):

• Loan: R1 million

• Repayment term: 30 years (or 360 months)

• Interest rate: 10.5%

• Monthly repayment: R9,147

• Total interest paid over 30 years: ~R2.3 million

You can play around with the values using this calculator

Now we apply the magic touch: Repay R1,000 extra per month, so the total monthly payment goes from R9,147 to R10,147. Check this out:

• New monthly repayment: R9,147 → R10,147

• New repayment term: 30 years → 19 years

• New total interest paid R2.3mil → R1.3mil

Wait, WHAT!?

Why it Works

How can only R1,000 per month make such a big impact?

The answer lies in the amortisation table. It shows how your monthly repayment is split between interest and capital.

The answer might shock you: in the first few years of the loan, you’re only repaying roughly R400 out of every R9,147 - the rest goes purely to interest.

So here’s the magic: The extra R1,000 you commit goes directly toward the capital portion of the loan. That means you’re targeting the part that actually matters.

Capital repayment goes from R400 pm to R1,400 pm. Now stretch that over the full duration of the loan, and before you know it, you’ve shaved 11 years off your bond.

Should We Not Rather Invest The Extra R1000 pm?

In most cases - no. Here’s why:

• Debt repayment savings are guaranteed: the amortisation table is 100% predictable. If you commit R1,000 extra to your loan, the “return” is clear and certain.

• Property is a simple, tangible investment - not nearly as volatile as the stock market.

• Repaying and owning one’s own home provides a sense of security and comfort

Another important point: To beat your bond, your investments need to consistently outperform your interest rate after tax and after fees - and that’s not guaranteed.

When Investing might make more sense

• If your bond interest rate is very low

• If you are already aggressively paying down your bond

• If your portfolio is too heavily weighted toward property (diversification is NB)

The Bottom Line

The Instagram influencer will show you a graph comparing stock market returns and conclude that stocks are better - but that’s not how life works. Life is more real and more complex than an Excel spreadsheet.

Stocks are great (in fact, they’re our favourite), but when it comes to this specific R1,000, this is one of the few places in finance where a small, consistent action creates a guaranteed, life-changing result.

Who Are We?😎

Paul Roux

Ingrid Kluckow

Our Full Offering🎖️

We have extended our value offering to five key pillars:

1. Investments

2. Insurance

3. Arbitrage

Thank you for trusting us with your wealth. If you have any questions, want to review your portfolio, or just want to chat about what’s happening in the markets, feel free to reach out anytime.

Warm regards,
Paul & Ingrid