Online Calculator | What Is An Access Bond?

What Is An Access Bond?

Over the past few years, a new type of bond has emerged called an access bond.  You can now get access bonds at almost any bank.  An access bond treats your home loan much like a savings account.  It also provides a balance to your savings account that is equal to the equity of your home. 

For the most part, an access loan works very much like a traditional home loan, only with a savings account attached.  The balance of that savings account is configured on the equity of the home, from which the bond is based.  In other words, the more equity you have in your home or the more your home is worth, the more money you would have in your access bond savings account.  If you take money out of this savings account, however, you are actually taking it out as a loan against your home’s equity.

In many respects, this offers consumers a unique type of money management opportunity.  If you pay money into your home loan, on top of your normal installment, it not only allows you to pay off the home more quickly, but it also establishes a surplus that can be used for short-term loans.  However, don’t forget that these funds must be paid back.  You will pay them back at the same interest rate you have on your home loan.  Really, the key thing to keep in mind is to only borrow what you can pay off in a comparatively short amount of time.

One advantage of an access bond is that you are able to access the equity in your home loan.  This can be done at any time, and you can use the money for such things as short-term debt, a holiday, home renovations, or a new vehicle.  In fact, purchasing your next car through an access loan might be a very wise move.  The interest rate on a home loan is usually lower than the prime lending rate, whereas, car loans are slightly higher than the prime lending rate.  Thus, borrowing on an access bond allows you to purchase your vehicle at a lower interest rate.

It’s also popular to set up student loans on an access bond.  Student loans have higher interest rates, and are set up to ensure that you pay interest for the maximum amount of time.  This is because you can only pay interest, until the student has graduated from school.  Choosing to use an access bond for these expenses assures a lower interest rate.  It also allows you to repay the money on a more suitable timeline.

Just like with any loan, access bonds have advantages and disadvantages.  They do have a lower interest rate, but access bonds also have a shorter payback term.  If you fail to meet that payback term, you could end up paying far more in interest than you would have paid with a conventional bond. Also, you need to keep in mind you are borrowing against your home.  Because of that, if you don’t repay the loan the bank can repossess your property.

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