The most common are from banks where you borrow money in order to buy a property. In order to qualify you have to show a very clean credit rating and an ability to be able to pay your monthly repayments back faultlessly. This deal can take up to six months and the bank might still tell you that a 10 to 15% deposit is needed over the property in order to qualify for the loan. The terms of this loan are normally over 20 to 25 years. So, it is a seriously long-term commitment.
If you have an arrangement as above, your house is basically bonded to the bank. This means that they technically own the property until you repay them the loan you have on it.
Now let’s say for instance you need a loan. But your house is bonded. What can you do?
Well the first and best thing is to contact the bank and get a revaluation on your property. The bank would charge you for this service and you might not necessarily get the loan. But if they find more value in your property, they would increase your bond amount, and you could draw on those extra funds at a really good rate (you won’t get a better rate than the banks). Problem is they are really prudent with there revaluations and in this Covid environment they probably aren’t wanting to do too many deals.
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There are of course Bond originators that will look for better deals for you, however they are only as good as the banking sector offers, so if the banks don’t have an appetite for risk, they won’t be able to get you a deal. They also charge a sometimes-hefty commission.
If your house isn’t bonded what is the situation with getting a loan?
Once again you will have to go to the banks or finance institutions.
They will need to value your property which could take a month if you’re lucky. Then you have to submit a lot of paperwork to justify affordability. This means being able to prove that you can afford the monthly repayments. The banks have always been very strict on people wanting this finance. And basically, after all this and up to 6 months later, it’s either a yes or a no. They stick to very rigid guidelines about who they can lend to, and if you don’t meet the criteria you are out! At First Advance we look at the perceived and real risk of our clients and factor our interest rate on that. So simply put… if you are a high risk and look like you may at some stage not be able to pay us, we will not say NO to you like a bank. Rather we will charge you a higher monthly rate to cover us from the risk of default.
Our specialty is to provide a fast and efficient method of getting a loan on your property that helps you gain time to find a more long-term solution.
In today’s economy with the Covid-19 Pandemic, a lot of people that wouldn’t normally need loans will be seeking them. Banks will typically not be lenient to this plight and might even become fussier about which clients they help.
At First Advance we will always try and help you! We will never be able to charge the same rates as a bank, as the money we borrow to grow our business comes at a far higher cost than the cost of the banks money. This is because the banks lend money at Reserve bank rate which extremely cheap compared to the money our investors lend us our money at! But our model is different to the banks. We would rather risk doing a deal at a higher interest rate with you because you are not creditworthy enough to get bank finance, than leave you with no loan whatsoever!
The trick for you is to use us as a stop gap. You need to use us a temporary solution until you can find finance at a better rate. That’s what we tell all our clients because that what makes sense!
You might also be interested in Asset Lending in South Africa.
