LOANS AGAINST PROPERTY

Owners can release up to 60% of their property’s free equity or 30% in vacant land by registering a first or covering mortgage bond. Equity is calculated as property value minus any outstanding bond; for bond-free properties, it’s based on the lender’s valuation. Current market conditions typically allow for a maximum of 50% equity release, provided there’s little to no existing bond.

For a property valued at R2 million with a R200,000 bond, the equity is R1,800,000, with a maximum possible loan of R900,000, depending on the repayment security.

Approval in Principle usually takes up to 5 working days, subject to documentation availability.

Conditions include a minimum loan size of R1 million, interest rates of 2% to 4.5% monthly, a one-time professional fee of 2%-5%, options for early settlement without penalties, and preferred loan durations of 3-9 months, extendable to 24 months.

For security on loans, a first bond over the property is necessary, with second bonds not accepted. The current bond is settled through the loan, which is to be repaid by profits from proposed transactions. Property valuation is conducted by the credit provider, and clients may submit their own for initial assessment.

Funds usage is at the client’s discretion, with a repayment agreement for a future date, ideally between 3 to 9 months. Monthly interest payments are required. Credit providers might ask for additional security, including directorial resignations, subordinating company loan accounts, and pledging company shares. These are safety measures, rarely enforced, and are a last resort. Loan repayment assurance is crucial, focusing on the ability to settle the loan rather than the security provided.

To apply for a loan against property, first, sign a mandate and fee agreement. Provide the entity’s name, registration documents, office addresses, tax clearance, VAT number, recent financial statements, director/shareholder IDs, surety details, recent bank statements, a solvency certificate, property title, independent valuation, latest rates account, and a detailed exit strategy. Post assessment, an Approval In Principle or decline is issued. Fulfillment of all conditions leads to fund release, typically within 10 days of document submission. Complete and prompt documentation is crucial for a swift process.

Whether you can rent out your property while it has a loan against it depends on the terms of your loan agreement. Most lenders allow this, but it’s important to check your contract for any restrictions or requirements you might need to fulfill. Some lenders may require notification or approval before you can rent out the property, so it’s always best to consult with your lender to understand any specific conditions related to renting.

If you can’t repay a loan against property, the lender may initiate legal proceedings to recover the owed amount. This often involves selling the property used as collateral. The sale proceeds go towards settling the loan, with any excess funds returned to you. Defaulting on the loan can also negatively impact your credit score. It’s crucial to communicate with your lender if you anticipate difficulties in repayment, as they may offer solutions like restructuring the loan.

Yes, you can still apply for an equity release if you co-own the property. However, all co-owners typically need to agree to the loan and may be required to sign the loan documents. The lender will assess the application based on the combined financial profiles and the equity in the property. It’s important to discuss this with your co-owner and consult with the lender for specific requirements and conditions.