· Many first-time home buyers find it difficult to enter the property market. They often pool borrowed resources to come up with a deposit to qualify for finance.
· With the launch of Absa’s first-to-market Family Springboard home loan, the bank has now formalised this financial arrangement whereby friends or family members can help first-time buyers to enter the property market by opening an Absa Fixed Deposit account and ceding 10% of the property purchase price as security for the loan.
· The first-time home buyer essentially gets a 100% bond with the assistance of a friend or family member willing to act as a helper.
· The Absa Fixed Deposit account will accrue interest and the refundable deposit will be returned to the helper when the security is released after about 48 months.
· As an added benefit, the borrower will receive a 50% reduction in the initiation fee and Absa will cover the bond registration cost to the value of R4 200.
The process of buying a property needs to be simplified to permit more entrants into the property market, allowing individuals who would not ordinarily be able to afford a house to become proud home owners.
Absa’s Family Springboard home loan will allow applicants, who meet Absa’s credit criteria, to successfully apply for home finance if they have a helper who is willing to assist by investing 10% of the property purchase price in an Absa Fixed Deposit account as security.
Carel Grönum, Head of Absa Home Loans, says, “As property prices have increased, the deposit required to buy a property has also risen, making it difficult for a lot of first-time home buyers to access the funds needed as deposit. Many are increasingly turning to close friends or family, usually their parents or guardians, for assistance with raising a deposit.”
“We have created a home loan offering that serves to formalise this financial arrangement between family members. It means that a new generation gets help purchasing a new home, while friends or family members assisting them, get their money back with interest – provided that the repayments on the home loan are kept up to date,” says Grönum.
“The deposit ceded by the helper will be held as security for about 48 months and will be interest bearing. After this period, the helper can apply to have the deposit released – the release of the security will however be subject to a property valuation and credit approval.”
A great number of South Africans are unable to gain access to the property market because they simply cannot afford a deposit. The Family Springboard aims to help close that gap.
“The housing backlog in South Africa currently stands at 2,3 million and Absa Home Loans is committed to play a pivotal role in addressing the housing challenges faced by many South Africans.”
“Access to housing is vital for the sustainable growth of our country and we will continue to put our customers at the heart of the solutions we develop to ensure more South Africans gain access to the property market,” adds Grönum.
He believes that the bank’s intervention in attracting new entrants into the property market requires a long-term view.
“Family Springboard forms part of a bouquet of value-adding solutions which Absa Retail Bank has introduced to make our customers’ lives easier and provide them with access to finance as we strive to become the “Go-To” bank in South Africa,” says Arrie Rautenbach, Chief Executive of Barclays Retail Bank Africa.
In July this year Absa also introduced MyHome, a home loan targeted at people earning less than R18, 600 a month. The MyHome proposition offers Absa customers a 30% discount on initiation fees as well as a 30% discount on bond costs. The respective discounts are effective until 31 December 2014 and will be applicable to home loans which have been approved and/or attorney instructed during this period.
Having recognised the information gap in the market place, Absa in conjunction with the French Development Agency, furthermore established the First Time Home Buyers (FTHB) educational programme to educate consumers about the process involved in buying and owning a property.
The FTHB programme aims to educate 17, 000 first-time buyers by the end of this year. Some of the topics covered by the programme include financial management, sustainable home ownership, repayments options and all other aspects related to buying a property.
“The financial services industry has an important role to play in closing the information gap in the market by ensuring that consumers are armed with the correct information to make informed decisions when buying a property for the first time,” concludes Grönum.