Lake Properties Lake Properties
Let’s break it down further and explore each part in more detail, including practical uses, risks, and how it works in South Africa:
๐ What is Equity in a Property?
Equity is the value of ownership you have in your property. It increases over time as:
- You pay off your bond (reduce your loan balance), and
- The market value of your property increases (capital appreciation).
Formula:
Equity = Market Value of Property − Outstanding Bond Amount
๐งฎ Example:
- Your home is valued at R2,500,000
- You still owe R1,300,000 on your bond
- Your equity is R1,200,000 — this is the value you "own" in the home
๐ฆ What You Can Do with Property Equity in South Africa
1. Apply for a Further Bond / Second Loan
This means asking your current bank (e.g., FNB, Standard Bank, ABSA) to lend you more money using your existing equity as security.
- ✅ Best for: Renovations, funding a child’s university, consolidating debt.
- ๐ง Example: FNB offers a “Further Loan” product where you can borrow from the equity in your home.
- ๐ Requirements: Your affordability will be reassessed, and a property valuation will be done.
2. Re-advance Your Original Loan
If you've already paid off a portion of your bond, you might be able to re-borrow that paid amount without taking a new loan.
- ๐ ️ Example: You had a bond of R1.5 million and paid it down to R1 million—some banks allow you to "re-advance" R500,000.
3. Refinance Your Bond with Another Bank
You switch to another bank that offers a better rate or loan terms and borrow more than what you owe, using equity to access cash.
- ๐ก Tip: Use a bond originator like ooba or BetterBond to help compare offers from different banks.
4. Use Equity as a Deposit for Another Property
If you're buying a second home or investment property, some banks allow you to use the equity in your current property as collateral for a deposit.
- ๐️ Good for: Investors wanting to build a property portfolio without large upfront deposits.
5. Sell the Property and Access the Equity in Cash
When you sell, your equity is the money you receive after paying off your bond and selling costs.
- ๐งพ Example:
- Sale Price: R2.8 million
- Bond Outstanding: R1.2 million
- Transfer/Agent Costs: R180,000
- Cash in hand: ~R1.42 million = your equity
⚠️ Risks & Cautions When Accessing Equity
Risk | Explanation |
---|---|
๐บ Increased Debt | Borrowing against equity increases your monthly bond repayments. |
๐ฆ Credit Assessment | Banks will assess your income, expenses, and credit score again. |
๐ Property Value Drop | If property prices fall, your equity could shrink (or become negative). |
๐ธ Bond Registration Costs | You may pay fees for a new bond or additional loan—these can be significant. |
๐ What You’ll Need to Access Equity
- Latest property valuation (your bank usually sends a valuator)
- Proof of income (salary slips, bank statements)
- Good credit history
- Legal costs (conveyancer fees if a new bond is registered)
๐ Summary
Use of Equity | Description |
---|---|
✅ Further Loan | Borrow more money using your home’s equity |
✅ Re-advance | Reuse what you’ve already paid off on your bond |
✅ Refinance | Switch bonds and access a portion of your equity in cash |
✅ Second Property | Use equity as a deposit or collateral |
✅ Cash from Sale | Sell and get the equity after bond & fees are paid |
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