Tim Akinnusi of Nedbank compares 20-year home loan terms to 30-year home loan terms.
Before we get to the pros and cons of a 30 or 20-year loan term, I think it's important to state that a lot can happen between 20 and 30 years. Ideally, you want to limit your repayment period, thereby limiting your exposure to factors that could impact on your ability to repay over a long period of time. For example, most homes in South Africa are resold after seven to eight years.
The pros and cons of a 20-year term versus 30-year term are quite simply on a 20-year term, you'll be expected to pay a much higher monthly repayment than a 30-year term. The pro to that is that your interest charge will be a lot less, given the shorter period of time. On a 30-year term, you'll be expected to pay a lot less on a monthly basis, but over time, you'd probably end up paying a lot more interest.
Regardless of the 20 to 30-year bond period, ideally what you want to do is to repay your home loan as quickly as possible to avoid unnecessary interest charges.
