16 Apr Using Instalment Sale as a Home Loan Mechanism
In 2008 a client asked us to help their employees purchase homes. We needed to find a way to make home loan finance cheaper for end users and we needed to be able to design around the needs of our target market.
Enter the instalment sale. This is not a new product for ownership, the motor industry has used it for decades, but it was new in the home ownership space.
Reducing the costs for First Time Home Owners
Upfront costs are often a huge stumbling block to first time home owners.
Through an instalment sale agreement, which affords the purchaser all the rights and benefits of ownership and is recorded at the Deeds office, we can reduce the costs usually associated with buying a home.
Our home loans have no upfront bond registration costs, transfer fees or transfer duties. These are only payable when final payment is made, but in Year 20 and based on the house price in Year 1. Upfront costs consist of a Section 20 Registration Fee and a Chartwell Initiation Fee, which is less than R10,000.
Deposits are also difficult for young first time home owners, who haven’t been able to save up sufficiently. With our home loans, we offer 100% of the funding requirements, no deposit required.
The smaller costs that add up
We then took it further. The levies, service fees and rates and taxes due by the homeowner is paid on their behalf by Chartwell and recovered as a total monthly payment. It’s a small thing, but it allows for easier administration and lower bank fees.
Next, life insurance is required. By negotiating with insurance providers on behalf of our purchasers Chartwell has been able to offer comprehensive insurance at the lower prices.
All of these reduced costs go a long way to making home ownership more affordable.
In our next blog, I will discuss how our home loans are designed around the needs and circumstances of our target market from rent-to-own to short term debt consolidation and continuous education.