FINANCE MATTERS
First-time homeownership : The importance of the borrower ’ s education programme
By the Banking Association of South Africa
The borrower ’ s ( homeownership ) education programme is a prerequisite for first-time homebuyers to gain access to home loan finance .
In 2005 the banking sector concluded a Memorandum of Understanding ( MoU ) with the National Department of Human Settlements , in which one commitment was for mortgagees to ensure that first-time homebuyers within the Affordable Housing market segment made an informed decision when buying a home and that they understood the obligations , responsibilities and benefits of homeownership .
There are a number of topics that are covered by the respective mortgagee ’ s borrower ’ s education programmes , some of which include : discussing what a home loan is , what process is followed when applying for a home loan , affordability ( which includes drawing the applicants attention to any state housing subsidies that may be available ), completing the offer to purchase , what it means to be a homeowner , forms of ownership ( freehold versus sectional title ), budgeting , moving in , how to make payments on your home loan , why short and long term insurance is important , what to do when wanting to make home improvements and what to do should the homeowner encounter financial difficulties .
The delivery methods of the respective mortgagee ’ s borrower ’ s education programmes vary as some mortgagees provide booklets / manuals to customers while others offer the programme through electronic platforms . Upon successful completion of the borrower ’ s education programme , a certificate is issued to the first-time homebuyer / s . A mortgagee will not register a mortgage bond over a property until the prospective homeowners have successfully completed their borrower ’ s education programme .
In recent months , mortgagees have become aware that some estate agents have been completing the borrower ’ s education on behalf of applicants / clients . This is of concern to mortgagees as they treat borrower ’ s education as a prerequisite for affordable housing first-time homebuyers to access home loan finance .
“ In recent months , mortgagees have become aware that some estate agents have been completing the borrower ’ s education on behalf of applicants / clients .”
Estate agents who take it upon themselves to complete the programme for their clients goes against what the borrower ’ s education programme is trying to achieve and is undoubtably not in the best interest of the customer , as the rationale for borrower ’ s education is to ensure that customers have a good understanding of what their homeownership journey will entail . It serves as a vital source of information for homeowners and empowers them to engage on specific topics and where a customer does not seem to have a good understanding / grasp of the content . The mortgagee appointed vendors who facilitate the programme are able to re-engage customers who have been unable to successfully complete the upskilling programme and encourage them to redo the programme .
As the Banking Association we have since written to the Estate Agency Affairs Board to draw their attention to the issue and to request their intervention . As an Association representing all commercial banks in South Africa , we appeal to estate agents that under no circumstance should they complete the borrower ’ s education programme for their clients as they would in effect be disempowering consumers .
www . saaffordablehousing . co . za JULY - AUGUST 2021 19