Sat Oct 22 09:16:49 SAST 2016

Home could be source of cash

By unknown | May 02, 2007 | COMMENTS [ 0 ]

Isaac Moledi

Isaac Moledi

In the light of the shortage of retirement accommodation in South Africa, estate agency Nationlink says it is important for homeowners of retirement age to consider a "reverse" bond.

A reverse loan, said Piet Botha, chairman of Nationlink, is a home loan taken against the debt-free portion of the value of the home.

It is useful for owners who need money to finance an investment opportunity, a large-scale renovation project, unexpected medical costs, or who simply want to be financially independent.

"There are many retirees who have been living in their home for the past 10 or 20 years and are sitting on a golden nest egg without realising it," he said.

"In view of the residential property market's performance in recent years, their homes might have doubled, tripled or even quadrupled in value, providing a large amount of equity to secure a reverse loan."

He said that on a home bought 10 years ago for R250000 and now worth R750000, for example, there is at least R500000 worth of equity to secure such a loan, and the property value is likely to increase further over time.

The major advantage of a reverse loan is that the repayments are capitalised for as long as the borrower lives in the home, which must be a primary residence.

Repayment of the reverse loan amount, comprising all cash advances received as well as the interest, becomes due only if the home is sold and vacated.


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