FINANCE
Is Refinance
Still Viable?
Experts Weigh in on the Conversation
BY JEAN BROWN
We ran a somewhat controversial piece in our March 2017 edition called‘ The Demise of the Access Bond’, in which author, Gary Palmer of Paragon Lending Solutions, claimed that“ the age of the access bond is over”, and that traditional access loan have been“ all but eradicated”.
In his article, Palmer warned that investors and small business owners wanting to access additional capital through their home loans would be“ caught unawares”, with banks no longer being able to offer these loans due to regulatory requirements in the National Credit Act and Third Basel Accord. In addition, he cautioned that their applications may“ trigger changes that then result in new, unattractive rates from their bank”.
More experts weigh in on the conversation According to Tess Rodrigues of Property Factor, while it is true that certain banks no longer allow flexi / access bond options to withdraw up to the original granted amount, she maintains that“ all banks still offer the option of paying more than your monthly instalment on your home loan and these additional funds paid remain available in a flexi / access facility”. Rodrigues adds:“ Should you need more than the funds that are available to you ‒ i. e. additional funds previously deposited ‒ then you will have to make a full application. Once approved, new terms and conditions will be offered. More often than not, these will be less favourable than the ones you currently enjoy”.
Praven Subbramoney, CEO of Private Lending at FNB, highlights that it is important here to understand the difference between access to additional prepaid funds versus access to equity in your property.
According to Subbramoney, to comply with relevant regulatory requirements, the bank is obliged to recontract with clients who want to unlock equity in their property that requires a change to either the loan term, bond amount or collateral( property) type.
“ Since 2008, bank regulation governing banks has changed ‒ resulting in stricter capital and liquidity requirements for banks worldwide; this has had a direct impact on the cost of funding. Clients entering into a new credit agreements are assessed for the new contract and the interest rate on the new contract may be lower or higher than a previous agreement.”
According to Rodrigues, banks like ABSA, Nedbank and FNB still offer clients who currently have a transactional account in the books, a flexi / access facility upon approval of a bond.
“ Standard Bank clients have to apply for such a facility once the bond has registered but, while we are not involved with the application for a flexi / access facility, we have not received feedback from any of our clients that such application has been unsuccessful, therefore we have no reason to believe that Standard Bank are attempting to do away with their flexi / access facility.” Subbramoney adds that FNB clients entering into a new credit agreements are assessed for the new contact and that the interest rate on the new contact“ may be lower or higher than a previous agreement”. He concludes, however, that mortgage lending“ still remains one of the cheapest forms of credit for clients today and utilising funds from a facility is the most affordable form of funding, when compared to unsecured lending”.
RESOURCES
FNB, Property Factor
30 JUNE 2017 SA Real Estate Investor www. reimag. co. za