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.
This type of loan offers borrowers a unique type of money management opportunity. Whatever you pay into your home loan, over and above your normal installment, not only allows you to pay off the home more quickly, but it also provides a surplus that can be used for short-term loans. However, one must keep in mind that these funds must be paid back, and you will pay them back at the same interest rate you have on your home loan. Therefore, the key is to only borrow what you can pay off in a relatively 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.
Student loans are another area commonly addressed with an access bond. Student loans have higher interest rates, and are generally structured to ensure you pay interest for the maximum amount of time, in that you can only pay interest until the student has graduated from school. Choosing to use an access bond for these expenses guarantees a lower interest rate, and allows you to repay the money on a more convenient timeline.
Like all loans, access bonds have advantages and disadvantages. Although they may have a lower interest rate, access bonds also have a shorter payback term. Failing to meet that term could result in paying far more in interest than you would have paid with a traditional bond. Also, keep in mind you are borrowing against your home, so if you fail to repay the loan, the bank can repossess your property.
