ABSA Home Loans Shocker: who will be affected

Property Finance News: ABSA Home Loans

South Africa’s largest mortgage provider, ABSA Home Loans, announced recently that it would restrict access to the extra funds available in the Bond Accounts of some of their clients.

Just less than 17% – about 130 000 – of ABSA’s home loan clients, who use the 261 flexi facility, will be affected by this decision. Those using the 264 Flexi facility for access to capital will still have access to the equity in their home loans.

The equity in a home loan is the difference between the outstanding bond amount and the original loan. And, the equity in your property is the difference between the outstanding bond amount and the current value of your property.

The decision shocked many ABSA Home Loans clients into switching their existing bond to another mortgage lender and to withdraw any extra funds from your bonds before the deadline.

Those affected by this decision includes clients who merely pay their instalments each month, but now need cash and want to draw some of the capital that they have built up via the 261 Flexi facility.

In such cases clients will now have to apply for the finance and, in terms of Credit Act criteria, have their affordability re-assessed.

Below is a statement from ABSA regarding the decision:

Absa Home Loans has decided to amend the FlexiReserve Comprehensive facility from the existing customer base.

Absa took the decision to amend the facility due to the decline in property values over the past six months. The bank felt that allowing access to the original loan granted without a validation of the property’s value, increased the risk for both the customer and Absa. As a responsible credit provider, the bank sees the amendment of the facility to prevent customers from going further into debt and put their homes in jeopardy. Read more…

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