CAPE TOWN - Sentinel Home, a home financing company, has widened their access to home finance with the launch of an alternative financing model to traditional home loans.
Renier Kriek, the CEO of Sentinel Homes, said that one of the biggest problems many people face is access to finance to buy a home.
Kriek said "Although they may be able to afford monthly home-loan repayments, they struggle to get a home loan from a bank because they are self-employed. freelance, are foreigners or foreign income earners, have no credit record or are expatriates".
Sentinel's model is based on instalment sale finance which is the same concept used to provide motor vehicles and other movable consumer goods. By innovatively applying the concept to provide home finance, buyers can get finance of up to 95% of the purchase price of a home.
According to Kriek, the home purchase process continues as normal. The buyer finds a home, signs an offer to purchased. If the offer is accepted, the buyer goes to a bank or bond originator for a home loan.
If the bank offers a smaller bond or turns down the application, the buyer can apply to Sentinel for finance. If accepted, the sale is concluded and, after the relevant conveyancing process, the buyer can move in.
The buyer then pays a monthly instalment for the duration of the repayment term, consisting of the interest due on the principal, portion of the capital and a monthly service fee. The interest is levied at competitive interest rates connected to prime.
Unlike with a bank home loan, the Sentinel remains the registered owner of the property until the last instalment is paid. If the buyer faults on the payment, an arrangement can be made with Sentinel immediately to address the deficit.
Although Sentinel gradually reduces the total amount financed over 240 months, the balance is due in full as a balloon payment after 120 months.
Homebuyers can settle the balance using their own capital, a bank loan or they can sell their home. It may be possible to extend the loan from Sentinel.
If a homebuyer defaults on instalments due to job loss, illness, death or other unexpected reason, the home can be sold to settle the finance and balance is paid to the buyer.
To qualify for Sentinel's financing, the buyer need s a good credit record and a secure financial situation. The instalment must be affordable. The home being purchased must fall in the R500 000 to R2,5 million price range, and be a single title or sectional title in the Western Cape. Financing across the country will be rolled out in due course.
The company which launched at the beginning of May has already been receiving applications for home loans. According to Kriek, they have restricted their operations to the Western Cape to ensure that they maintain a certain maintenance level but they are looking to expand to other provinces.
- BUSINESS REPORT ONLINE