Should I invest or pay off my home loan?

You have a bit of money left after the debit order. The bond is the biggest debt in the house, and a unit trust or ETF might earn more than the rate you are paying. Both uses of the same rands cannot be right at once, so the useful question is narrower: what does this surplus do on each path, over the years you still owe the bank?

Compare the after-fee return with the bond rate

A home loan rate is a cost you stop paying when the balance falls. An investment return is a hope until it arrives. If the return you expect after fees (and after tax, if the account is taxable) is lower than the bond rate, paying the bond wins on the numbers. If it is higher, investing the same surplus can finish ahead, because the money compounds for longer.

South African home loans are usually quoted as a nominal annual rate, compounded monthly. Prime in the September 2026 example used across these pages is 10.75%. Many bonds are priced as prime, or prime plus or minus a small margin. The calculator uses that same monthly compounding for the investment, so a 10% bond and a 10% return are on the same footing. It is not a forecast.

The fair comparison also follows the cash you free up. If you pay the bond off early, the old instalment can be invested for the rest of the original term. If you invest the extra instead, the bond keeps running and only the surplus goes into the market. Both paths spend the same rands. The difference is where those rands sit.

A worked example in rands

Take a bond with R1,500,000 left, at an illustrative 10.75%, with 20 years to go. The instalment that clears it on schedule is about R15,228 a month. You can add R2,000 a month, and you do not have a lump sum. The investment assumption is an illustrative 9% a year before a 0.5% fee, with no tax drag. That 0% tax drag is the TFSA-style case.

Put the extra into the bond and it is paid off in 14 years 2 months, which is 5 years 10 months early. You pay about R1,424,623 of interest instead of about R2,154,824, so you save about R730,201. From the month the bond hits zero, the calculator invests the old instalment plus the R2,000 until the original 20 years are up. That pot is about R1,561,106.

Invest the same R2,000 instead and the bond still runs the full 20 years. You pay the higher interest bill, and the extra grows to about R1,253,998. At the 20-year mark, paying the bond leaves you about R307,108 ahead. The house is owned outright on both paths by then, so it is not given a separate price.

The table uses those same bond inputs. Only the expected return changes. The fee stays at 0.5%, and the tax drag stays at 0%. The gap is measured at 20 years. "To investing" means the invested surplus finished higher.

Interest saved on the bond path does not change with the investment return. In this example it stays R730,201, and the bond is still paid off in 14 years 2 months. What changes is whether the invested rands outgrow that head start. Run your own balance in the invest or pay off my bond calculator.

The break-even return is the decision line

On the default inputs, investing finishes ahead only when the expected return is above 11.25% a year. That figure is the gross return you would type into the calculator, before the 0.5% fee is taken off. With no tax drag it sits about half a percentage point above the bond rate, because the fee has to be earned back before investing can match the interest you would have saved.

A taxable account needs a higher gross return again, because part of the growth goes to SARS. The calculator has a tax-drag slider for that. It is a single percentage, not a tax return. Interest outside a TFSA is taxed as income above the annual interest exemption. Capital growth can attract capital gains tax, and the effective rate depends on your bracket. A rough top-rate capital gains illustration is sometimes put near 18% of the gain. Treat that as a sketch.

Emergency fund and expensive debt come first

Neither path is the first rand you should move. Keep cash you can reach in a hurry, often a few months of expenses, before you lock money into a bond or a fund. Then look at debt that costs more than the bond. Credit cards, store accounts, and personal loans are usually the expensive ones. Clearing those is a guaranteed saving at a higher rate than a home loan. The debt payoff calculator compares avalanche and snowball plans in rands.

Liquidity matters after that. Extra payments on a traditional bond are hard to get back if the geyser bursts or the car dies. An access bond, or a flexi facility, often lets you withdraw prepaid capital again, which makes prepaying less of a trap. Banks do not all work the same way, and the calculator does not model redraws, penalties, or a debit order that the bank recalculates downward.

If the rate itself is what worries you, a prime move changes the instalment before it changes this decision. The September 2026 step took prime from 10.50% to 10.75%. The interest rate hike guide walks through that, and the rate hike calculator turns your balance into a monthly bump.

Where a TFSA fits, and where a retirement annuity does not

If you have not used a tax-free investment account, it is the cleanest place for the "invest the extra" path, because growth inside a qualifying account is not subject to income tax, dividends tax, or capital gains tax. The limits are on what you contribute. From 1 March 2026 the annual limit is R46,000, up from R36,000, and the lifetime contribution limit stays R500,000. R2,000 a month is R24,000 a year, which fits under the annual cap, but a large lump sum might not. Contributions above either limit are taxed at 40%.

Official detail is on the SARS tax-free investments page. For a plain explanation of the fund versus the account, read what an ETF is, and how a TFSA fits.

A retirement annuity is a different product. Contributions can be deductible, within the usual limits, and growth inside the fund is not taxed along the way. The money is locked in until retirement. This calculator does not add the tax deduction back, so do not read a TFSA-style result as an RA result. If the goal is a long investing horizon rather than the bond, the R1 million calculator and the R1 million timelines are the companion sketches.

When paying the bond wins even if the return looks higher

Some households want the bond gone more than they want the last rand of expected growth. That is allowed. A paid-up home is a quieter monthly budget, and it does not depend on a market that can fall for a few years just when you needed the money. The calculator will still show the rand gap. You can choose the smaller number on purpose.

The maths leans the other way when three things are true at once: the bond rate is modest, you can leave the invested surplus alone for the full term, and the after-fee return you believe in sits above the break-even line. If any of those is shaky, paying the bond is the sturdier default. If you are still deciding whether to have the bond at all, the rent vs buy calculator is the earlier question.

Put your bond in the calculator, then track the plan

The R1,500,000 example is a sketch so the steps are visible. Your rate, your remaining term, and the extra you can keep up are the numbers that matter. A lump sum, a higher fee, or a tax drag can flip the result without changing the story: same surplus, same horizon, one rand gap.

Should I invest or pay off my bond?