Newsletter • Quarter 2 • 2023
PENSION-BACKED HOME LOANS
A pension-backed home loan is when your loan is secured by your retirement fund savings rather than by a mortgage bond.
A pension-backed loan can be used:
- to buy vacant land
- to build a house or improve your current home
- to pay a deposit or pay towards bond registration costs and fees
- to pay off an existing home loan.
How much may you borrow?
- The maximum amount you may borrow is 80% of your after-tax withdrawal benefit.
- The minimum loan is R5 000.
- The loan depends on how much you have saved in your retirement fund and how much you can afford.
Pros and cons
- You will receive favourable interest rates and fees on your loan, which is negotiated with the Fund.
- Loan repayments are conveniently deducted from your monthly salary.
- If the interest rate changes, your loan term adjusts, rather than your repayment amount (unless you are too close to normal retirement age).
- The maximum loan term is 20 years.
- The loan needs to be repaid by the normal retirement age, as set out by the Fund.
- You must be the property owner.
Financing alternative energy solutions with a pension-backed home loan
With a pension-backed home loan you can finance the following:
- Solar UPS systems.
- Solar domestic geysers.
- Solar pool heating.
- An inverter attached to an electrical board.
- A hybrid system comprising solar panels, an inverter to convert solar DC to AC and lithium batteries to store the energy.