No deposit required!

Banks have recently gone from offering 108 percent bonds to requiring that you have anything from a 10 percent to a 30 percent deposit and that you fund all costs related to acquiring the property from your own pocket.

On a purchase of a R1-million, with a 10 percent deposit, this translates to having approximately R150 000 available. This is with a 10 percent deposit; heaven help you if the bank insists on a larger deposit!

The crucial question is; how many young people have this kind of available cash under their mattresses?

Fortunately, some banks have had a look at this situation and came up with a workable solution to assist those who wish to purchase a home, but do not have the available funds to cover the deposit and the property-related costs.

Using your pension as security, you are now able to obtain a loan for the shortfall.

The requirements

  • You need to belong to a good pension scheme or provident fund.
  • You need to establish your withdrawal benefit currently available in the scheme.
  • The property must be your primary residence. This product is not suited for investment properties. It is designed to assist those who wish to purchase a home.
  • As per the National Credit Act (NCA) requirement, you need to be able to afford both the mortgage bond and the loan secured by the pension scheme.
  • Your loan needs to be repaid before you retire, resign from the scheme, sell the property or on death.

The advantages

  • Provided you can afford the loan and there is sufficient withdrawal benefit available, you can raise the deposit and property related costs through a pension secured loan.
  • The product entails two separate accounts, one being the mortgage bond and the other being the loan secured by the pension scheme.
  • You can have your mortgage bond at the bank that offers you the best home loan product, while you have your pension-secured loan at one of the banks that offer this product.
  • The home loan and pension-secured loan account don’t have to be for the same repayment term. You should repay your pension-secured loan as soon as possible, releasing the burden on your pension.
  • If you are married, you can use your spouse’s pension fund or yours, or both.

Many first-time home buyers will now be able to own their home. Bear in mind that this product not only affects your finances now, but right until the day you retire. Speak to a mortgage bond consultant who is well-versed in this product and who will be able to advise you accordingly.

Article by: Tess Rodrigues - www.propertyfactor.co.za