No more easy ac­cess to ex­tra cash

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

Be­fore the Na­tional Credit Act (NCA) was in­tro­duced in 2007, it was com­mon for banks to grant you an ac­cess fa­cil­ity on your bond that en­abled you to with­draw money you had paid into your home loan ac­count.

How­ever, since the in­tro­duc­tion of the NCA, banks are re­quired to con­duct an af­ford­abil­ity test be­fore they can ad­vance you funds from your home loan.

Luthando Vu­tula, the manag­ing ex­ec­u­tive of Absa Home Loans, says the bank will not have to as­sess your af­ford­abil­ity if you want to with­draw funds you have paid into your mort­gage bond over and above your nor­mal monthly in­stal­ment.

But, Vu­tula says, you will not be able to ac­cess the dif­fer­ence be­tween the out­stand­ing bal­ance and the orig­i­nal loan amount without un­der­go­ing a credit as­sess­ment. This means the bank will have to re­ex­am­ine your ex­penses and in­come to de­ter­mine if you can af­ford the re­vised monthly re­pay­ments.

For ex­am­ple, if you have a bond of R1 mil­lion with monthly re­pay­ments of R10 000 and you pay only the min­i­mum amount each month, af­ter a year the out­stand­ing bal­ance would be about R995 000, de­pend­ing on the in­ter­est you are be­ing charged. You would not be able to with­draw the dif­fer­ence of R5 000 without the bank first con­duct­ing an af­ford­abil­ity as­sess­ment, even though you qual­i­fied for a bond of R1 mil­lion the pre­vi­ous year.

On the other hand, if you have a bond of R1 mil­lion with re­pay­ments of R10 000, and you pay in R12 000 each month, af­ter a year you would be able to with­draw or ac­cess up R24 000 – the amount (R2 000 x 12) you paid in over and above your min­i­mum monthly re­pay­ments.

You should bear in mind that the in­ter­est you are charged is cal­cu­lated on the out­stand­ing bal­ance.

When you de­posit ad­di­tional funds into your home loan, the bal­ance is re­duced, and, for as long as the ad­di­tional funds re­main in your home loan, the in­ter­est cal­cu­lated on the bal­ance is also lower. The bal­ance and hence the in­ter­est charged in­crease with any with­drawals you make, re­gard­less of whether you are get­ting a re-ad­vance on your loan or with­draw­ing ad­di­tional funds you had paid into your home loan.

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