ABSA offer a superb product. Pension Supported Housing Loans
What is a Pension-supported Housing Loan?
A pension-supported Housing Loan is an alternative way to fund any aspect of one’s home. ( can be used to fund the banks LTV lending limit variances – or for registration and transfer fees in relation to new and further advance Home Loan which must be the employee’s normal residence)
It is so named because the pension or provident fund benefit due to an employee can be used as security against the loan without eroding the retirement benefit. The amount borrowed is guaranteed against the fund – it doesn’t come out of it. This means that the employee’s pension or provident fund value is only affected in exceptional circumstances.
The Fund Managers, Trustees and Employers determine the maximum amount that can be borrowed as well as the percentage and payback terms. The percentage could vary between 50% and 80% of the employee’s withdrawal benefit.
The Absa Pension-supported Housing Loan must be repaid within a maximum term of 30 years or by the time the employee reaches normal retirement age – whichever comes first. i.e. retirement age 65 – present age 45 = 19 years max term of loan
Key Benefits of the PSHL
Absa Pension-supported Housing Loans have a prime-linked interest rate that depends on the potential total value and number of loans in the fund. In this way, members get the benefit of a group-based interest rate, which favours lower income earners in particular.
Absa does not charge initiation fees or monthly service fees in most cases, thus making it affordable and significantly cheaper than another loan.
Credit Life Insurance is available from Absa which covers death, disability and retrenchment to help make sure the loan is paid off in the event of any of these happening. The monthly premium is charged to, and included in, the repayment.
The fund will settle the loan when:
The employee leaves the company and stops deductions
The employee resigns from the funds and withdraws his or her benefit
The employee is disable, retrenched or dies (where no insurance option was in place
The employee retires and there is an outstanding loan balance
The employee defaults on the loan if it is not remedied in time