ZIMBABWE’S biggest mortgage lender, CABS, has introduced a new product, Equity Release finance which allows paid up customers to re-borrow 50% of the value of the paid up properties over a five-year period.
by TARISAI MANDIZHA
CABS managing director Kevin Terry told The Standard that the development was necessitated by the need for the bank to offer cheaper and long term loans to individuals and corporates with unencumbered assets. It was also necessitated by the need to tap into clients’ unused capacity to borrow represented by equity held in properties.
“The Equity Release product comes in between a traditional mortgage and an unsecured personal loan. It presents an opportunity for our clients to sweat their assets and get funding for other financial needs that would ordinarily require a more expensive short term facility,” Terry said.
“For the Society it presents an opportunity to offer secured loans for consumptive purposes, providing cover in the event of default (and) thereby generating interest income for the institution.”
He said the maximum loan tenure was five years and the loan limit was up to 50% of the value of the property.
“This was necessitated by the demand from customers who wish to borrow against their paid up properties for purposes other than those permissible under the traditional mortgage loan product. This product provides home owners an opportunity to re-mortgage their properties to access relatively longer term finance for consumptive purpose,” Terry said.
He said the interest rate for this product was 18% per annum and valuation fees for the property were 2% of the loan amount.
Terry added that the bank was also charging loan application fee of US$100 for individuals and US$150 for corporates, while clients should also budget for bond registration fees of approximately 5% including stamp duty and VAT.
“The limit is up to 50% of the value of the property provided the borrower has the capacity to repay the loan. Loan repayment should not exceed 25% of gross monthly income. Maximum loan tenure is five years,” he said.
Commenting on the measures to mitigate against defaulters, Terry said CABS would register first mortgage bonds over the immovable properties in the name of the borrowers. Thus, loans are secured.
Terry said the normal credit assessment will be applied to all borrowers and limiting the exposure to not more than 50% of the value of the property.
In 2014 CABS increased the tenure of the mortgage financing to 20 years from the 10 years that they had been offering since 2009, and was one of the first banks to reach such achievement.
Most financial institutions in this country are offering loans that have a tenure of 10 years although they face problems of defaults. In January last year more than 30 properties were auctioned by financial institutions to recover money owed.