Older and self-employed people have more difficulty in getting bonds than others

Following on from his recent widely publicised plea that South African banks should take into account a bond applicant’s assets – particularly those which he is prepared to offer as additional security on the bond amount – Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, Rawson Finance, has pointed out that, as things now stand at the banks, two important classes of potential property investors are often prevented from participating in property transactions.

These, he said, are older people, including pensioners, and many self-employed individuals.

“Under the current modi operandi”, said van Alphen, “even if the older person takes out life insurance ceded to the bank, any person aged over 60 is likely to have difficulty in getting a normal 20 year bond – especially if his income stream is now limited. The banks, for obvious reasons, like to insist that such bonds be geared so as to be fully repaid by the time the applicant is 70 years old. While this is understandable, it has to be said that it is often these people who have financial assets with which they are interested in buying property. Moreover, this older type of person is also often a very competent landlord, because he or she has the time to visit the property regularly, maintain it properly and to check on the tenants. In general, older people provide a more caring and comprehensive landlord service.”

Also, in a sense, discriminated by the banks, said van Alphen, is the self-employed person who may be highly successful, or on the road to success in a new enterprise, but who does not have a track record of consistent earnings as yet.

“I appreciate only too well that banks are not in a position to assess the future performance of a business or a service provider. Here again, however, in many cases the entrepreneur who is prevented from getting a bond on account from a fluctuating or inadequate income stream, is also often the person who, in his previous work roles, has built up a big asset base. What is more, such people are almost always prepared to cede to the bank the right to take over some of these assets, provide they get a bond. It seems that many of us in bond origination think that a restructuring of the bond award process regarding these two categories of people is now necessary.”

Article from: www.rawson.co.za

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