What is Pension supported Housing Loans?

A Pension-supported Housing Loan is an alternative way to fund any aspect of one’s home. It is so named because the pension or provident fund benefit due to an employee can be used as security against the loan without eroding the retirement benefit. The amount borrowed is guaranteed against the fund – it doesn’t come out of it. This means that the employee’s pension or provident fund value is only affected in exceptional circumstances.

How do Pension-Supported housing loans work?

• Section 19(5) (a) of the Pension Funds Act empowers pension funds to furnish guarantees to secure housing loans granted to members by third parties such as Absa.
• Every month employees contribute to the fund for their retirement.
• The fund uses their savings to provide a loan guarantee to Absa.
• Money is deducted from their wages/salary every month to repay their
Pension-supported Housing Loan.
• The loan has to be repaid in full before normal retirement age or if your employee leaves the fund, thus with no negative effect on your retirement savings.
• The process starts with a Pension-supported Housing Loan Surety ship

Agreement between Absa and a registered retirement fund followed by the participating employer(s) agreeing to make payroll deductions.

Absa offers an advanced, tailor-made, dedicated scheme administration system with competitive interest rates and high value-added benefits for all your employees. This system ensures less impact on employer resources.

You’ll also get:
• A genuine home finance service for retirement fund members
• An optional credit life insurance policy to protect members’ fund benefits
• Professional assistance for members when they apply for loans
• Online application forms, making it easier to apply
• An optional protection against any form of fraudulent activities with verification mechanisms to ensure that all loans are used for housing purposes only.

Who needs pension supported loans?

Many people have difficulty obtaining a home loan involving a bond whilst other types of loans are usually too expensive or too small to use for housing purposes.

With a Pension-supported Housing Loan from Absa, your employees or members have another type of loan for housing purposes that is affordable, convenient and does not involve the time and costs of registering a bond.

The Pension Funds Act permits funds to furnish guarantees only as security for loans granted to members for housing purposes.
The following fall within the definition of housing purposes:

• Buying an existing home
• Redeeming an existing loan for housing purposes (i.e. settling your home loan or part thereof)
• Building a new home
• Improving an existing home

The property must be owned by the employee and must be used as the normal residence of the employee and/or his/her dependants.

ABSA Pension Supported Housing Loan (PSHL) Focus on 3 Core Elements:

The fund (involving managers, administrators, principal officers and trustees), employers (both in the private & public sector and unions) and the employees (all the fund members).
Absa PSHL develops trust and security between themselves and the fun administrators through solid, responsible lending and due diligence of the Absa systems set in place.
It also gives employers peace of mind by supplying a product that is convenient and trustworthy.
PSHL is hassle-free and has limited impact on company resources since the entire process from applications to approvals or declines, to payouts is all managed by Absa.

And finally, employees benefit the most. Not only do they get the chance to own a dream house, they also have financial security, controlled monthly payments, highly competitive interest rates and the backing of a major bank.

How can we make it easier?

Our structures are in place to make everything easier. From online applications to committed and reliable employees, we take the administration hassles out by offering employees affordable and realistic housing loans.

How Do You Keep Control

Fund managers, trustees and employers determine the maximum amount that can be borrowed as well as the percentage and payback terms, meaning you know exactly what to offer the employees in your company. We give you all the resources to do it your way.

For example, if an employee has a withdrawal benefit in the fund of R50 000 (net of income tax and other statutory deductions) and the fund has set a rule that the maximum any member can borrow is the equivalent of 70% of their withdrawal benefit, then the maximum the employee can borrow is R35 000. Absa will manage this on behalf of the fund.

The amount an employee will be able to borrow depends on how much savings they have available in the fund (their withdrawal benefit) as well as how much they can afford to repay every month and for how long.

Mortgage Plus will find the right deal for you. Guaranteed!

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

The pros and cons of each.

Whether you’re building, buying or renovating a home, it’s a challenge if you don’t know what to expect. Save yourself many grey hairs by finding out exactly what you’re letting yourself in for – from construction and financial perspectives.

Every cent spent on building, buying or renovating a home will probably be one of the best investments you’ll ever make – if you don’t over-capitalise on your property. Property experts warn that, just like any other investment, research and timing are everything if you want to maximise on the investment in your home.

There’s no right or wrong answer to the question, ‘Should I build, buy or renovate?’ The most important factor is the reason for wanting to do so.

Most people who choose to renovate are happy where they live, but either need more space or want to improve their property and its value. Renovating is, however, not always the more economical option if you need more space. It could easily be more expensive than building a new home or selling your existing home and buying a bigger property.

The decision to build or buy is not easy. The freedom to decide exactly how big your house will be, what shape it will take and which finishes you’ll use is not only a luxury, but it’s also an experience that most of us would probably like to have just once in our lives. The downside is most of us have limited building knowledge, we don’t know how sound the house is going to be until well after the builders have left and the budget will runneth over, particularly if you haven’t chosen your builder well.

So you need to ask yourself: is the present a good time to renovate or build? Generally, I would say this is probably a less wonderful time to build than, say, the end of 2007. Why? Because through 2008 we saw a sharp increase in building costs. This widened the gap between the average existing house price and the average cost of building a house, to a point where building cost is now estimated at 20% higher than the average existing house price.

In addition, there’s still a significant amount of distressed selling. This means that buyers can still find existing bargains in established neighbourhoods. Not surprisingly, building activity is currently very weak. Developers and contractors are finding it very tough bringing competitively priced new units onto the market.

This may be the case for the rest of 2010, at least until the oversupplies of existing properties decrease and existing house prices increase considerably.

“Providing house-price inflation continues, 2011 may be a better time to build. We’re not saying that one shouldn’t build now, but for the time being, the existing home market still offers some good bargains, although there are fewer as the market continues to recover.

Time to make up your mind:

Building – the pros

• You’ll have control over everything that will affect you on a daily basis.
• You’ll get to learn useful things about home construction as you monitor the process, and you’ll get a sense of ownership that comes only from watching your house take shape.
• If you choose correctly, you’ll have the expertise of the builder, contractors and architect to guide you.
• If you employ professionals, they will handle the paperwork for approval with local authorities, sub contractors and suppliers.

Building – the cons

• Be prepared for the unexpected costs that occur in most home construction projects. You will have to pay for them.

• Building a house takes time; waiting for it to be completed can be disheartening.
• Finding alternative accommodation during construction can be costly. (If you can’t move out while you’re renovating, you’ll have to make peace with living on a “building site”.)
• Whenever a decision has to be made or a problem arises, you have to deal with it – daily. This can take its toll, unless you’re strong-minded.

Buying – the pros

• You get to shop around and become a critical customer.
• You have the luxury of comparing different homes with different features until you find exactly the right combination at the right price.
• It’s a buyers’ market at present, so you can generally drive a tough bargain and get the best deal possible, especially in the case of a serious seller.
• You can take your time house hunting.
• As for moving in, if the seller agrees, you can move in straight away and pay occupational rent until the house has been registered in your name.

Buying cons

• If your needs are very specific, it could take quite a while to find a home that meets your criteria.
• As you did not design the house yourself, you may never find your ‘perfect’ house and have to make concessions regarding certain features.
• Be prepared to spend additional money on updates and repairs if the property needs some work.
• Looking for a new home and making an offer once you’ve found what you want can be stressful.
• You might need to act fast or make an offer that’s more than the asking price if you get stuck in a bidding war.

*John Loos is an FNB Property Strategist

Mortgage Plus : knows the business of mortgage bonds.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za