When you take out a home loan, most people assume that every monthly payment chips away steadily at their debt. The truth is a little more complicated - especially in the early years of your bond.

📊 Amortisation: How Your Home Loan Really Works

A home loan is structured using amortisation. That means each monthly repayment is made up of two parts:

1. Principal – the portion that actually reduces your outstanding loan balance; and
2. Interest – the bank’s charge for lending you the money.

In the first few years, the interest portion is much larger. As time goes on, more of your monthly payment goes toward paying off the principal amount.

The 105% Loan Example

Many South African banks will allow you to finance not only the property but also your transfer and bond costs, bringing your home loan to 105% of the purchase price.

Here’s the catch: if you borrow R1,050,000 on a R1,000,000 property over 20 years, you owe more than the home is worth from day one. So how long does it take just to get your balance down to 100% (R1,000,000)?

• At prime + 1.25% (11.75% as of 2025), your first repayments are dominated by interest;
• It can take around 3 to 5 years of regular payments before you’ve reduced the balance to the original purchase price;
• This means that if you were to sell the property too soon, you might still owe the bank more than the selling price after costs.

Why This Matters

• Early repayments: Even an extra R500–R1,000 a month directly reduces your principal and helps you break through that 105% faster.
• Lump sums: A tax refund, bonus, or inheritance can shave years off your bond by cutting the interest bill.
• Prequalification: Understanding your affordability before applying can help you decide whether a 105% loan is the right fit or whether it’s better to cover costs upfront.

The Bottom Line

Home loans are powerful wealth-building tools, but they’re front-loaded with interest. On a 105% bond, don’t be surprised if it takes a few years just to “break even” with your property value.

That’s why working with a bond originator like Phoenix Bonds is so important - we’ll show you the numbers upfront, explain how amortisation works in your case, and help you find the bank that gives you the most flexible terms.

👉 Thinking of buying with a 105% home loan? Chat to Phoenix Bonds for a prequalification today - and get the confidence of knowing how long it will take to see your balance really start to come down.