Latest news with #RenierKriek
IOL News
10 hours ago
- Business
- IOL News
Why short-term loans can jeopardise your home loan application
Aspirant homeowners are advised to exercise caution and financial responsibility when it comes to using credit. This may be the case even while they are keeping up with repayments, says Renier Kriek, Managing Director at alternative home finance business, Sentinel Homes. While all debt should be managed responsibly to maintain a good credit score, for many South Africans, short-term loans have become a way for citizens to make ends meet, or to fund luxuries they cannot afford but refuse to live without. Credit providers use various risk models to identify patterns in potential customers' spending behaviour-good and bad. They know what financially responsible and irresponsible spending patterns look like. 'Frequent short-term loans-with or without defaulting-are a risky pattern that implies an individual does not manage debt well, and that is something a home loan provider does not want to make a long-term investment in. 'The ability to delay gratification is the underlying attribute that responsible users of credit have, but there is no easy way to quantify whether a particular applicant possesses that trait – the number, frequency and type of unsecured credit transactions is a useful proxy in that regard.' Kriek said the right course of action, especially to those who already have short-term loans is to first, understand that short-term loans have their place but are seldom necessary. He urged these customers to stop using them and make a plan to pay off the ones they already have. Then they should get to work on building an emergency fund of cash that can only be touched for true emergencies, so that they will not need unsecured debt in those cases, he said. Secondly, he advised aspirant homeowners to work on saving for luxuries such as holidays and large capital purchases. He said they will be paying monthly anyway, whether they take the credit or save, but in the saving scenario, interest will be working in their favour rather than against them. He added that delaying the gratification of that large purchase is difficult, but no-one said adulting would be easy. Finally, Kriek said if there is no other option, they must opt for 'good' debt as far as possible. He said they should buy their clothes, furniture, appliances, groceries and other items using store credit if they absolutely cannot do without. He said they do not have to buy things they do not need to build a good credit score as everyday items and normal household purchases are fine.
Zawya
26-03-2025
- Business
- Zawya
South Africa: New court ruling intensifies debate over binding bond approvals
Competing precedents, including a recent court case involving a home buyer who got cold feet, wanted to walk away from the deal but couldn't, have sparked discussions in South Africa's property law circles. The judge ruled in favour of the seller, because both parties had signed a contract that became binding as soon as the buyer's credit provider issued its 'approval in principle'. "Some people misinterpreted the ruling, or disagree with it - saying it wasn't fair,' says Renier Kriek, managing director of Sentinel Homes. Yet the judgement followed centuries of contract law precedent by focusing only on the following question: At what stage did the purchase agreement become binding, before or after the property finance had been accepted by the buyer? 'Obtaining finance is a process, unlike a turning on a light switch, it's not instant and even positive results arrive piecemeal,' says Kriek. 'When you sign an offer to purchase a property and require a home loan, there's usually a condition that your loan must be approved before a certain date. This is called 'suspensive condition' – meaning that only once this condition is fulfilled, the contract will become final and binding. 'Buyers and sellers need to understand the suspensive condition in their contract, especially as they generally have competing interests in terms of the stage at which the deal should become final,' he says. 'It's therefore important to phrase your contract without ambiguity, so it's not open to misinterpretation.' Real-life consequences Contract law may sound academic but it has serious, real-life consequences. Since nobody wants to lose their deposit, Kriek urges buyers to fully grasp the financing process: When a home loan provider assesses your application to buy a house, and is satisfied it can lend you the money, it will first issue an approval in principle (AIP). Then it conducts a valuation, before eventually issuing a prescribed document called pre-agreement statement and quotation. According to the NCA, the buyer has five days to accept the pre-agreement statement and quotation, which then becomes a final offer of finance. 'From the seller's perspective, it would be best if the agreement of sale would likely contain a clause stating that the contract becomes binding as soon as the home loan provider issues the AIP,' says Kriek. 'From the buyer's perspective, however, this clause poses a risk: it means you're bound to the sales agreement, the sale is final, and your deposit could be on the line, even before you have agreed to the interest rate and other finance conditions suggested by the home loan provider.' Ideally, he advises buyers to ensure the sale is only binding once, namely that: a) the bank has issued the pre-agreement statement and quotation, and b) you have accepted it. 'This means you can only lose your deposit or be forced to buy the property once you have agreed to the terms of the credit proposed to you.' Check the nitty-gritty Also watch out for home-loan approvals that require the submission of approved building plans. As a rule, your offer to purchase should require the seller to do so. But if this clause is missing, the seller won't be obliged to provide the building plans, even if your home-loan provider requires these. This makes you as the buyer responsible for obtaining the plans. It's not only time-consuming but if plans can't be approved, due to unauthorised building works, your deposit may once again be at risk. This also applies to any other conditions your home loan provider may have. You have to ensure that these conditions are also in the sale agreement, so that the two documents tie into each other. For these reasons, Kriek urges buyers to get legal advice before signing their offer to purchase. Don't rely only on the property practitioner or others linked to the seller. No-one should take a hig cost and high liability decision like buying a home without expert legal and other professional advice, such as from a registered property practitioner and bond originator. Ultimately, understanding the nitty-gritty of your contract should help you avoid financial losses and enjoy a smoother property transfer. All rights reserved. © 2022. Provided by SyndiGate Media Inc. (
Zawya
13-03-2025
- Business
- Zawya
South Africa's housing crisis: Why 2.2 million homes are needed immediately?
South Africa has a housing supply backlog of at least 2.2 million units, with a significant shortage in the affordable housing or 'gap market', according to a recent study by the Centre for Affordable Housing Finance (CAHF). The gap housing market is generally considered to be households earning too much to qualify for Reconstruction and Development Programme (RDP) housing but too little to obtain traditional bank-financed homes in the open market. Renier Kriek, managing director at Sentinel Homes, says 40% of consumers fall into the RDP housing category (household incomes below R3,500 per month) and the wealthiest 30% of households are well-served by the open housing market. Massive demand The gap market is the middle 30% of consumers where the supply of housing stock is extremely low and even declining despite massive demand. Kriek argues that a market design error is to blame for this high demand going unmet. Adverse market design disincentivises the holders of capital to invest in affordable housing. The biggest hurdle relates to the unnecessarily lengthy, cumbersome, and expensive processes associated with evictions and foreclosures. The cost of restarting the transaction (eviction or foreclosure) is prohibitive in South Africa and does not align with market circumstances. South Africa should adjust their regulatory environment to favour private-sector investment and the expansion of supply. 'We need to reduce the transaction cost for the holders of capital to take their chances on consumers who are not acceptable risks in the unduly high tenure security environment. In this way, some people will move into the formal housing market and fall out again, and perhaps more than once in their lifetime. If we go through enough of these cycles eventually everyone will be housed.' Kriek admits that this solution may sound slightly callous and counterintuitive to the casual listener. 'The alternative, retaining our restrictive policy environment, is even more callous and is currently barring people from ever getting the opportunity to enter the formal housing market. What use is being born free if you will never realise that constitutionally mandated right of access to adequate housing?' Unintended consequences Another prevalent and reasonably fixable market design problem relates to government subsidies. The Department of Human Settlements has been offering the First Home Finance (FHF) subsidy, previously called FliSP to households in the gap housing market. It aims to subsidise affordable first-time home-ownership opportunities for households with income from R3,501 up to R22,000 per month. It is an inverse means-tested subsidy, meaning that the cash grant is lower the higher the household income becomes. 'Millions of rands earmarked for this subsidy have remained unclaimed in the past and continue to remain unclaimed. This is not because people do not know about the incentive or do not desire it. The first challenge is the relative scarcity of gap housing stock, which is driven by poor demand due to incentives that are adverse to the deployment of capital in this segment, whether by landlords or home-loan providers.' Kriek argues that the subsidy design has unintended consequences resulting in market participants, such as estate agents, being unwilling to sell to subsidy recipients. 'Due to overzealous fraud-prevention measures and perhaps also an unwillingness to integrate into the existing market infrastructure, government has traditionally insisted that the registered title deed contains the name of the subsidy recipient before it releases the subsidy amount.' This means that the subsidy portion is usually received months after the transfer, unlike all other funds in a property transaction which are secured by third party payment functionaries such as banks or attorneys. This makes each property transfer involving a subsidy inordinately complex, and everyone involved prefers doing the same transaction with a consumer who does not rely on a subsidy. Usually, it's the estate agent waiting for the subsidy payment to receive their commission, and that is simply an unacceptable adverse incentive if government's intention is to have the subsidy reach its intended recipients.' Subsidy system chaos Though recent developments seem to favour fixing the market design shortcomings of FHF, the administration of the subsidy remains positively byzantine. There is a national subsidy authority, that can approve and pay subsidies, and a separate subsidy authority for each of the provinces, each with a unique set of rules and procedures and a separate application procedure. This is a quagmire for lower income consumers to navigate successfully, especially where those who rely on subsidies are already viewed negatively by market intermediaries such as estate agents and transferring attorneys. It will take significant political capital to implement market design solutions that can solve the problems facing the gap housing market. If we do nothing it may even get worse, says Kriek, who fears that the current government may not have the ability to adequately diagnose the problem, and much less the political will to affect the necessary policy and regulatory changes. If successful, finding solutions to the housing supply problem could significantly contribute to job creation, supporting the government's recent efforts outlined in the President's State of the Nation Address. All rights reserved. © 2022. Provided by SyndiGate Media Inc. (
