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How to use your retirement fund to help you buy your own home

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© Provided by CapeTalk

Many South Africans struggle to get the loans they need to buy a home or even put down a deposit should it be required, says Mandy Wiener.

This is where a pension-backed home loan can come into play.

Mandy Wiener speaks to Shameer Chothia, Senior Consultant at Momentum Corporate Advice and Administration about how you can use some of your retirement savings to buy a home.

Many retirement fund members are unaware of the current legislative framework which allows for retirement funds to offer these types of housing loan guarantees.

Shameer Chothia, Senior Consultant – Momentum Corporate Advice and Administration

Progressive retirement funds like FundsAtWork make it possible for members to use these retirement savings, and in effect, what it comes down to is a member is allowed to access a portion of his retirement savings which he can use for purposes of his housing loan.

Shameer Chothia, Senior Consultant – Momentum Corporate Advice and Administration

In the FundsAtWork plan, a member younger than 50 may access 60% of available retirement funds to guarantee a home loan, he explains.

Members over the age of 50 are only able to use about 20% of the total, due to being closer to retirement age.

Some of the advantages are that this is just like a normal loan and there are no bond registration costs, there are preferential rates agreed upon upfront, low initiation, and monthly fees – and installments are deducted directly by your payroll division so the risk of default is fairly low.

Shameer Chothia, Senior Consultant – Momentum Corporate Advice and Administration

Another area where this may be used as it is linked to a home loan is that of home improvements he notes, a trend they are seeing increasingly among members.

The cost of home improvements, getting yourself off the grid with Eskom issues, are things that are picked up quiet a bit of late.

Shameer Chothia, Senior Consultant – Momentum Corporate Advice and Administration

© Provided by CapeTalk