PROPERTY EQUITY RELEASE
Equity refers to the current value of your property
You can now access up to 50 % of the equity in a UNBONDED residential, commercial property, industrial property or agricultural land in as little as 10 days.
YOUR LOAN CHECKLIST
- No Bonds – The property HAS TO BE 100 % UNBONDED (BOND-FREE)
Property Value – R 2 million or more
Loan Amounts – Minimum of R 1 million or more
Max. Equity Release – 50 % of the property value
Repayment Term – 3 months to 24 months
Repayment – Monthly ‘interest only’ repayments and settlement of the capital at the end of the loan term
Security – First bond registered over the property
Default – Please do not apply if you cannot settle within the loan term agreed
What is an equity release?
Equity release allows you to access the equity (cash) tied up in your residential, commercial, industrial or agricultural property. To qualify for an equity release, your property must be fully paid up and bond-free, with a property value over R2 million.
What is equity?
Equity refers to the current value less the current bond amount OR if unbonded, the current property value.
Equity release loans are a quick way to secure finance but the borrower must be able to show the home equity lender that they can settle the loan. Contact us to arrange a quick and effective way to access your property’s equity! No bank delays. Personal service. Quick decisions. Competitive Rates.
Examples of where the release of equity is applicable:
A client has a property that is being renovated or is being built. Cash is needed to complete the project. If completed then the property is worth more than the amount that has been invested in the renovation and so equity release will enable the person to complete the project. The client MUST HAVE a buyer that has lodged securities with the transferring attorney. Property equity release can take place.
A business owns a property (commercial, industrial, residential or agricultural) and needs to access equity quickly to take advantage of some opportunity. Equity finance can be arranged and a cash advance provided in 10 days, using the property as security for the loan granted….as long as there is a guarantee of repayment provided.
A developer has nearly completed a residential or commercial development and needs to release the profit made, before the transfers to new owners take place. An equity loan is ideal.
A cash deposit is needed to secure another loan. A property can be offered as security and a Home equity loan is then provided by release of home equity.
How To Release Equity
Adequate security for the loan to be provided such as, permission from first bond holder to take a first bond over the property.
Loan settlement plan needs to be achievable. For example, proceeds due from other activities, policy payout, investment maturing, contract proceeds being paid out etc.
Property bridging facilities are granted to juristic persons i.e. companies / legal entities. Company details and financials, FICA, property and repayment motivation documents to be presented.
Equity to be approximately double the value of the bridging loan required.
Minimum loan to be R2 Million Maximum almost unlimited !
Longest term of loan is 24 months but ideally 3 to 9 months.
Equity Release / Property Secured Bridging / Term Loans using Property
Up to 60 % of the residual or “free equity” in a building and up to 30 % in vacant land, can be released to the owner of the property by the registration of a first bond or covering mortgage bond over the property. Equity is, the value of the property less the outstanding bond and if no bond, then the properties value as determined by the lender.
In current market conditions lenders are however only granting up to 50% of the equity where no other security can be offered and ideally the property should be bond free or not have a bond of more than 10 % of the market value. Eg. Value R2 million, less bond say R200 000, Equity R1 800 000. Maximum grant would be R900 000 UNLESS the exit plan (repayment of the loan) is very secure.
An Approval in Principle (the first step in this process) takes up to 5 working days to secure. This is very dependent on the availability of supporting documentation.
– Minimum loan size is
R 1 million.
– Interest rate 2% to 4.5% per month (subject to change without notice)
– Once off professional fee of between 2% and 5% .
– Loans can be settled earlier with no penalties (subject to negotiation)
– Ideal loan duration is 3 to 9 months. Loans of up to 24 months can be arranged.
Two very important elements:
- Loan Repayment
A first bond needs to be registered over the property offered as security. Second bonds are not acceptable so the current bond will have to be settled and this amount will be added to the bridging loan applied for and should be settled by the proposed transactions, profits.
To determine the value of the property offered as security, the credit provider arranges to have the clients property valued. If you have a valuation, please submit for initial desktop assessment.
The client can then use the funds as they feel fit but with the understanding that the loan needs to be settled at a negotiated and agreed to time in the future ( 3 months to 9 months ideally) and interest hs to be serviced monthly.
In addition, the credit providers may also require additional security in that they will ask that directors:
1. Resign as directors of the entity (in blank) and
2. Subordinate any loan accounts in the company to the lenders
3. Pledge the shares in the company across to the credit provider for the duration of the facility.
It is necessary to keep these documents in the credit providers possession in the event of non-performance on transactions. However, to date, the credit providers have very seldom had to resort to
harsh action to enforce deal conditions, as a result of careful due diligence investigations being conducted.
In order to give comfort to the client credit providers are willing to sign letters addressed to the client confirming that changes to the company structure will only be effected should the deal run into extreme difficulties and / or only after all means to resolve the situation have been explored and that no other course is possible.
Credit providers are not in the business of taking over businesses or properties as they are pure money lenders and so these measures can be viewed as a last resort.
B. Loan Repayment
The loan repayment proposal is more important than the security. Security is easy to confirm. Both you and the bridging company need to feel 100 % comfortable that the loan can be settled in the time negotiated. The focus of all equity release applications needs to be the loan settlement proposal. The Security is only used in the event of a default on the loan settlement and no lender ( or client) wants to call in the security to settle the loan, so please focus on providing a clear and concise explanation and proof, of the ability to settle the loan in the future.
Signed Mandate to Proceed / Professional fee agreement (Third Party Payment instruction)
- Name of entity requiring funds
- Company registration documents
- Proof of registered, head office and business addresses
- Income tax clearance certificate
- VAT Registration number
- Latest Financial statements
- Directors/Shareholders copy of ID and FICA requirements
- Suretyships details i.e. Name, ID, FICA requirements
- 3 months of latest bank statements
- An audit certificate of solvency
- Copy of title deed of property offered as security
- An independent valuation of the property
- Copy of the latest rates account
- Exit strategy – a detailed description of how the loan will be paid back
- Documents/undertakings/business plans/future property sales etc.
Once this has been assessed by the credit committee, a decline or AIP (Approval In Principle) is issued. The AIP will indicate the “subject to” conditions relating to the loan.
Once all suspensive conditions have been fulfilled and accepted by the credit committee, funds are released to the client. This process should not take more than 10 days ( from when ALL the supporting documents have been presented). It is essential to have all documentation as required, in order for the process to take place quickly and effectively.
THE BELOW FORM ONLY APPLIES TO EQUITY RELEASE. PLEASE ONLY SUBMIT THE FORM ONCE AND CHECK YOUR INBOX FOR A CONFIRMATION EMAIL.