Lew Geffen has been in the real estate industry since 1972, is recognised as one of the leading experts in property in South Africa and holds many directorships in associated real estate and allied industries.
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Innovative Deposit Solutions to Secure Your Loan
Author: Lew Geffen Sotheby's International Realty | Published: January 19th, 2012
In the current South African property market, following on the heels of the global recession, it is extremely challenging to secure a housing loan. Most lending institutions require a deposit for properties over a certain price. Banks often require deposits as high as 30% of the property price, with 100% loans seldom granted for properties over R1 million.
The prerequisite for a hefty deposit, then, has become the biggest stumbling block for prospective buyers. Few have the liquidity necessary to pay a third of the asking price up front. There are, however, means of getting over this substantial hurdle. Lew Geffen Sotheby’s International Realty looks at some smart ways to overcome deposit difficulties.
Deposit Advantage
Deposit Advantage, a division of Lombard Insurance Company Limited, is a new product that has launched with the backing of Lew Geffen Sotheby’s International Realty. Deposit Advantage is an innovative means of ensuring you secure your deposit, so you don’t have to say goodbye to the house of your dreams.
When a potential buyer puts in an offer on a property, Deposit Advantage issues a guarantee which replaces the cash deposit that would normally need to be paid to the seller. This means that the buyer will be able to pay the full amount for a property upon transfer, instead of raising a cash deposit up front.
The guarantee is processed within 24 hours of application and is significantly more affordable than accessing money from a bond or bridging finance. If the guarantee ends up not being used, the buyer is refunded.
Deposit Advantage is specifically geared towards buyers who:
· Don’t have the cash availablefor a deposit.
· Have sold their home, but whose funds are not yet available for a deposit.
· Have cash tied up in shares or a fixed deposit.
· Want theirsavings to keep earning interest until the property is transferred.
· Don’t want to take their investment funds outof the market.
As Ya’el Fine, Executive Director of Lew Geffen Sotheby’s International Realty suggests, “This product will help keep more potential buyers in the running and brings owning property within the grasp of more people. Not having the cash available for a deposit is no longer an obstacle to buying the home you want.”
Bridging Finance
A less favourable alternative to Deposit Advantage is bridging finance. Bridging finance involves a short-term loan to maintain liquidity in an instance when an individual has a large cash inflow pending, but requires capital in advance of that. This is typically seen when one sells a home, but has to make a deposit on a new home before they have access to that capital.
As Fine notes, however, “This is a short-term solution and is unviable if you do not have asset backing. What’s more lenders usually charge premium interest rates on these kinds of loans, making them quite unfeasible. Sometimes, the approval of such loans can be subject to delays which can also compromise the buyer’s chance of securing the home before someone else does.”
The prerequisite for a hefty deposit, then, has become the biggest stumbling block for prospective buyers. Few have the liquidity necessary to pay a third of the asking price up front. There are, however, means of getting over this substantial hurdle. Lew Geffen Sotheby’s International Realty looks at some smart ways to overcome deposit difficulties.
Deposit Advantage
Deposit Advantage, a division of Lombard Insurance Company Limited, is a new product that has launched with the backing of Lew Geffen Sotheby’s International Realty. Deposit Advantage is an innovative means of ensuring you secure your deposit, so you don’t have to say goodbye to the house of your dreams.
When a potential buyer puts in an offer on a property, Deposit Advantage issues a guarantee which replaces the cash deposit that would normally need to be paid to the seller. This means that the buyer will be able to pay the full amount for a property upon transfer, instead of raising a cash deposit up front.
The guarantee is processed within 24 hours of application and is significantly more affordable than accessing money from a bond or bridging finance. If the guarantee ends up not being used, the buyer is refunded.
Deposit Advantage is specifically geared towards buyers who:
· Don’t have the cash availablefor a deposit.
· Have sold their home, but whose funds are not yet available for a deposit.
· Have cash tied up in shares or a fixed deposit.
· Want theirsavings to keep earning interest until the property is transferred.
· Don’t want to take their investment funds outof the market.
As Ya’el Fine, Executive Director of Lew Geffen Sotheby’s International Realty suggests, “This product will help keep more potential buyers in the running and brings owning property within the grasp of more people. Not having the cash available for a deposit is no longer an obstacle to buying the home you want.”
Bridging Finance
A less favourable alternative to Deposit Advantage is bridging finance. Bridging finance involves a short-term loan to maintain liquidity in an instance when an individual has a large cash inflow pending, but requires capital in advance of that. This is typically seen when one sells a home, but has to make a deposit on a new home before they have access to that capital.
As Fine notes, however, “This is a short-term solution and is unviable if you do not have asset backing. What’s more lenders usually charge premium interest rates on these kinds of loans, making them quite unfeasible. Sometimes, the approval of such loans can be subject to delays which can also compromise the buyer’s chance of securing the home before someone else does.”
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