Partnering with Sentinel Homes, South African bond originators ooba and BetterLife Group have extended their range of home financing options to better meet the needs of people who struggle to obtain home loans from banks. To start with this offering will only be available to Western Cape buyers, with plans to expand around SA.
"The alternative financing option from Sentinel Homes enables ooba to offer home buyers who do not qualify for a conventional home loan another financing solution," said Rhys Dyer, CEO of ooba, one of the largest South African bond originators. "This makes homeownership more accessible."
Mary Lindemann, Operations Executive of BetterLife Group, South Africa's largest home loan originator, says: "This offering is a good alternative for home loan consultants to fulfil more people's dreams of owning a home. Sentinel Homes' financing solution plays a significant role in providing a solution to home finance, which falls outside of traditional bank lending policies. A wider offering also positions BetterLife as an innovative business with a strong focus on meeting customers' needs."
Our solution provides finance of up to 95%
of the purchase price of a home
"We are pleased bond originators recognise the value of our home loan solution," said Renier Kriek, CEO of Sentinel Homes, South Africa's only open market non-mortgage home loan provider. "There is a growing need for such solutions, as bank lending policies have become stricter in recent years."
According to Kriek, banks typically decline home loan applications from the self-employed, commission earners, freelancers, foreign income earners and expatriates. They also may not grant the full home loan amount an applicant has requested.
"Our solution provides finance of up to 95% of the purchase price of a home," said Kriek. This often makes it possible for home buyers to purchase a home when they cannot pay a bigger deposit.
Sentinel's model is based on instalment sale finance, the same concept used to finance motor vehicles and other movable consumer goods. The buyer pays a monthly instalment for the duration of the repayment term, comprising the interest due on the principal, a portion of capital and a monthly service fee. Interest is levied at competitive interest rates linked to the prime rate.
"The monthly instalment is identical to what a bank's bond payment would have been within the same parameters," says Kriek. "This makes owning a home affordable and the monthly payments market related."
To qualify for an instalment sale home loan, consumers who cannot access a mortgage from the bank need a good credit record and secure financial situation. The instalment must also 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 home in the Western Cape. Financing across the country will be available in time.
"Sentinel is financed by its shareholders and South African banks, which perform stringent financial checks before providing finance," says Kriek. In addition to complying with the National Credit Act as a registered credit provider, as would banks and other mortgage providers, Sentinel also complies with the consumer protection framework codified in the Alienation of Land Act and Consumer Protection Act.