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Alternative to home mortgage finance

alternative-bond-financeAn alternative to Bond finance geared at small business owners. Small to medium business owners are finding it more and more difficult to qualify for bonds from South African banks who are desperately afraid of the high failure rate of new businesses in South Africa.

Banks are risk averse these days that if you are self employed, in a sales position without a fixed salary or any other employment where you have no guaranteed fixed amount of income, getting a bond is becoming almost impossible, even with large deposits and security, Crazy as it may seem, this is the reality of the home loan market.

Of course entrepreneurs like ourselves see opportunity where there is adversity and some have entered this market, offering self employed individuals the opportunity to purchase a home. Essentially you are offered creative finance from private equity companies who charge a fee and a slight premium on the money they loan to you. The idea is to make use of the bond alternative for 3-5 years at a slight premium, create a good payment track record and on the basis of that record, hand you back to the banks as a low risk customer.

In reality what the alternative to home mortgages are, are lease agreements where you lease the property for a period on a lease to own basis and once the loan is paid up, you take transfer of property. By doing this the finance company does not need to go through any expensive legal processes to repossess the property should you not make the required payments like a bank has to. They can simply cancel the lease and use the deposit to charge a cancellation fee.

Owning a home for a small business or self employed individual should not cost a premium. We are after all those that are creating jobs and stimulating the economy but alas, our government and banking institutions make it difficult for us. We chose this life because we get up and make things happen, so use those that make things happen, make it happen for you.

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