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Home Income Plan
This product was developed against the backdrop of South Africans struggling to close the "retirement gap". It is conventional wisdom that only around 6% of the population will be able to retire with enough capital to see them through their golden years. Assuming a population of around 47.4m, this means just over 44.5m people without enough to retire on.
The product targets those who are retired or close thereto and who would like to access funds for whatever reason. As it is an equity withdrawal, the amount is tax-free. It is specifically available to over-65's, living in their own home.
The loan gives a regular income or a cash lump sum or a combination of both, without having to make monthly repayments. However, the loan balance of an equity release loan grows larger over time.
The loans are given for 5 year periods at a fixed interest rate (minimum loan R200 000). After the period, borrowers can apply for a new loan, pay the loan amount in full or sell the property.
If the total outstanding loan amount gets to a point where it exceeds the value of the property this would result in 'negative equity'. However, a no-negative-equity guarantee is built into the product, provided the property is not sold.
The main advantage of the loan is that it can help retirees to maintain their standard of living. Main drawbacks are that the repayment amount can escalate to a substantial sum and that beneficiaries of the retiree's estate will receive less |
Posted on Tuesday, July 31, 2007 (Archive on Friday, August 31, 2007)
Posted by hayleym Contributed by hayleym
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