Mophethe explains that these retirement funds often negotiate favourable interest rates with the banks so you can unlock savings on your monthly mortgage repayment by settling an existing bond on more favourable terms.• Low initiation and monthly fees• Lower risk of defaulting on the loan
To qualify for a pension-backed home loan, Mophethe says you will go through the usual bank approval process, with the same requirements for supporting documentation. “You must be able to afford the monthly repayments, may not have any garnishee or administration orders against you, may not be under debt review or sequestration, and must have at least an acceptable credit score,” he explains.
The size of the loan will vary from fund to fund, but Mophethe says it will generally not be more than a specified percentage of the member’s withdrawal benefit. Mophethe says Momentum Corporate just launched an exciting new website to demystify difficult terms like pension-backed home loans. Visit employeebenefitsexplained.co.za for easy explanations of other employee benefits terms and concepts.