WORDS: ANNE SCHAUFFER IMAGES: SHUTTERSTOCK

Financing company Sentinel has partnered with top bond originators like ooba, to enable them to extend their range of home financing options in the Western Cape and Gauteng. They have plans to expand across South Africa.

“An instalment sale home loan is an alternative financing option which makes home ownership accessible to home buyers who do not qualify for a conventional home loan from banks,” says Rhys Dyer, CEO, ooba.

Say what now?

Dyer explains, “An instalment sale home loan is based on the same principle as financing the purchase of a motor vehicle on an instalment sale agreement, where ownership fully transfers to the borrower once the final payment on the loan has been made.

This financing option would suit home buyers who are unable to secure a mortgage – or a large enough mortgage – from a traditional bank, not due to lack of credit-worthiness, but due to their own unique circumstances. Those circumstances could range from being self-employed, commission earners, freelancers, foreign income earners, to expatriates and those without an established credit record.”

How do you qualify?

To qualify for an instalment sale home loan, a buyer is required to have a clear credit record, be able to afford the monthly repayment instalment, and have a deposit of at least 5% of the purchase price. The property purchased must be freehold or a sectional title property in a price range between R400,000 and R3,15m, and must be for own use.

Renier Kriek, CEO, Sentinel Homes, says, “Our solution provides finance of up to 95% of the purchase price of a home. This often makes it possible for home buyers to purchase a home when they cannot pay a bigger deposit.”

Higher costs and more complicated?

“The costs involved are similar to buying a property with traditional mortgage finance. The process, too, is also much like obtaining a mortgage from a bank and, if the finance application is approved, Sentinel Homes purchases the property and the buyer pays an instalment equivalent to a bond repayment. Ownership of the property passes on to the borrower when the final instalment is paid,” Dyer says.

Instalment sale home loan finance is regulated by the Alienation of Land Act, which affords the borrower protection and additional safeguards, such as having the instalment sale registered against the title deed of the property concerned. “Sentinel Homes is financed by its shareholders and South African banks, which perform stringent financial checks before providing finance,” says Kriek.