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