What does a home loan really cost over 20 years?
Over a standard 20-year term, the interest on a home loan commonly approaches — or exceeds — the amount borrowed. In a worked example at an illustrative 11%, a R1.5 million bond costs about R2.22 million in interest alone: roughly R3.72 million repaid in total.
The instalment is designed to feel like the price. The true cost is instalment × 240 — a number that appears on no advert.
The worked example
Take R1.5 million borrowed over 20 years at an illustrative 11%. The standard amortisation formula puts the instalment at R15,482.83 a month.
Now the multiplication nobody performs at the show house: 240 instalments of R15,482.83 come to about R3,715,878. Subtract the R1.5 million borrowed, and the interest is about R2,215,878 — more than the loan itself. At this illustrative rate, the bank is repaid the house-and-a-half for lending the house.
Why the early years feel like standing still
Interest is charged on the outstanding balance, and at the start the balance is at its maximum. In month one of the worked example, R13,750 of the R15,482.83 instalment is interest — only R1,732.83 actually reduces the loan. That is compounding running in reverse: the balance stays high, so the interest stays high, so the balance stays high.
The split slowly inverts over the term: the final years are mostly capital. This is why the total interest figure is so large, and why the balance moves so little in the first years even though the instalments never miss.
What moves the total
- The rate: home loan rates are typically quoted relative to prime and move with it — every fraction of a percent runs for up to 240 months
- The term: a longer term lowers the instalment but keeps the balance up longer, so total interest rises — the same mechanic covered in "How much interest does a personal loan really add up to?"
- The deposit: every rand of deposit is a rand that never gets charged 20 years of interest
- Extra payments: even small ones — this library works the numbers in "What happens if you pay extra into your bond?"
The once-off costs at the door
The loan is not the only cost of buying. Transfer duty is a government tax on the property purchase itself (below a value threshold, none applies); bond registration and the conveyancing attorneys who handle both processes carry their own fees, which scale with the price and loan size. These are once-off, typically paid upfront in cash, and sit outside the bond unless financed — the exact tariffs change over time and are published, so current figures are checkable before an offer is signed.
The honest way to read a bond quote
Three numbers describe the deal: the instalment (what it costs monthly), instalment × months (what it costs in total), and the total minus the loan (what the borrowing itself costs). All three exist the moment the rate and term are known. The instalment answers "can this fit the month?" — only the other two answer "what does this actually cost?"
Terms used on this page
- amortisation
- How a loan gets paid down: each instalment covers that month's interest first, and only the remainder reduces the balance — which is why early payments barely dent the debt.
- compounding
- Growth on growth: returns earn their own returns. It is why time in the market matters more than the size of any single deposit.
Reviewed July 2026