D-day for Absa bond-holders

If you got a letter about your home loan from Absa, then you have probably got one day left to withdraw all excess funds before the rules change.

After tomorrow (23 October), you will have to re-qualify and meet affordability requirements to take your home loan up to its limit, says Donnie Claassen of Quantro Garden Route, a mortgage origination company that specialises in loans for investors.

Claassen was responding to confusion around Absa's decision to tighten up on consumers accessing equity in home loans.

Recently it emerged that Absa had decided to stop many clients accessing equity in their bonds. After watching property prices tick downwards and the bank's cost of capital head upwards, Absa moved to restrict access to mortgages.

Customers will have to "apply" for savings stashed in home loans. They will have to go through a more rigorous process, and affordability assessment, to draw extra funds paid along with monthly instalments as well as re-paid capital and equity that has built up over the years, Realestateweb has reported.

Last week Absa executive director Louis von Zeuner said there are two products that are "important in this issue":

  • Where you have deposited a lump sum into a mortgage account, "and this is not to be changed". "If there is a once-off payment, customers will continue to access that amount and will be able to draw on it," he said;
  • Where you have been paying more than you needed to each month. Von Zeuner cited this example: "You are meant to pay R3 500 a month, you decided to pay R3 750 per month and now down the line you want to draw that additional R250 or whatever you paid in per month. We have changed that facility."

Claassen, meanwhile, told Realestateweb.co.za that there is a window opportunity, which will be closed by the end of the week, for many Absa clients to get their hands on the extra cash.

If you want the ability to access excess lump sums you have ploughed into your Absa 261 home loan as well as the difference between your original bond amount and the figure you have repaid, you must act preferably today or early tomorrow.

Claassen says that Absa sent out letters to bondholders in two batches. The first group of clients had until 15 October to act, and the second group until the 24th (Friday).

He says it is "still a very good thing" to save extra funds in your home loan, because you will help reduce the total interest bill.

However, if you are an Absa client, ask your bank to move you from a FlexiReserve 261 to a FlexiReserve 264. You will still have access to the difference between the outstanding balance and original loan granted in the latter.

"You must go into the bank and sign or ask for the 264 product," he says.

Claassen cites this example:

  • If you took out a bond for R500 000, have parked bonuses of R100 000 into this bond and have also paid off R100 000, you will only have access to the R100 000 in bonuses - unless you shift the funds to the 264 before the cut-off date. There you could access R200 000 if necessary.

When you shift the money to the 264, you must sign a variation of agreement so that you only pay an instalment that is the equivalent of repaying R300 000.

The idea of shifting the funds would be in order to safeguard a cash nest-egg.

The bank was obliged to give clients at least 10 days to make a decision, says Claassen.

The originator says many individuals have been struggling to cope with home loans for which they qualified some years ago but for which they would no longer qualify today.

Article from: www.realestateweb.co.za