PENSION-BACKED HOME LOAN (PBHL)
What is a Pension- Backed Home Loan?
What is a Pension- Backed Home Loan?
What is a Pension- Backed Home Loan?
A pension-backed home loan (as per the Pension Funds Act 19 (5) (a) and 37D) is an alternative form of housing finance where the loan is secured by your retirement fund savings instead of a mortgage bond.
How does it work?
What is a Pension- Backed Home Loan?
What is a Pension- Backed Home Loan?
The Pension Funds Act allows for a pension-backed home loan against your retirement savings. An agreement between the pension fund and your employer will be established.
The loan can be used to buy vacant land, build a house, improve your current home, use as a deposit or towards bond registration costs and fees. You must also be the owner of the property.
What is an in-house PBHL vs a funded PBHL?
What is an in-house PBHL vs a funded PBHL?
What is an in-house PBHL vs a funded PBHL?
The product can be structured as an in-house administrative service to Pension/Provident funds wherein the Fund provides the investment for the members, or FinCredit could source funding from our external investors. The process is identical however in the former the fund benefits from the interest returns whereas the latter will provide investor returns.
What is the loan term?
What is an in-house PBHL vs a funded PBHL?
What is an in-house PBHL vs a funded PBHL?
The maximum loan term is up to 30 years; however, this is dependent on individual fund rules and affordability.
What are the advantages?
What are the limitations?
What are the limitations?
- You can use the loan with a regular home loan as a deposit on a property.
- You can use a pension-backed loan to buy vacant land, build a house or improve your current home.
- You receive favourable interest rates and fees on your loan which is negotiated with the fund.
- Monthly loan repayments are conveniently deducted from your salary or wages.
- If the prime rate changes your loan term will adjust, rather than your repayment amount, unless you are too close to normal retirement age (option to have instalment vary).
What are the limitations?
What are the limitations?
What are the limitations?
- The loan can only be used to buy, improve, or repair residential property, or to pay off an existing home loan.
- You must own the property to qualify for a pension-backed loan.
- The loan needs to be repaid by the normal retirement age, as set out by the fund.
- If you fail to repay the loan, or exit the fund, your retirement savings will be used to settle the loan, which may have tax implications.
- Pension-Backed Loans are provided to all employees of participating funds and/or employees irrespective of income bracket.
Do I qualify for a PBHL?
To be eligible for our PBHL:
- You will need to be permanently employed.
- Your employer will need to be on our list of approved employers.
- You will need to be a South African citizen.
- You will need to be a member of the pension / provident fund for at least 12 months
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