Personal-Finance

Can I take out a mortgage with my siblings?

2019-02-27 09:01

The main risk is that you are ‘jointly and severally responsible’, meaning, if anything goes wrong, you could be held wholly responsible for 100% of the debt.

Aubrey writes:

I started a retirement annuity in 1999 and it matures in April this year. The company called me and told me I must re-invest it. What I want to know is why can’t I just get the payout since I am no longer interested in investing with them? I am unemployed and I want to use the money to start my own business.

CITY PRESS REPLIES:

The rules of a retirement annuity are that at retirement only one-third can be taken as a lump sum (less tax) and two-thirds must be used to purchase an annuity income. This is to ensure that retirees have a regular income in retirement.

This is the law and cannot be changed by the company. The only exemption is when the retirement value is less than R247 000. In that case you are able to take the full amount.

You can, however, buy an annuity with any other investment company. You do not have to stay with the one that you originally invested with.

However, if you stayed with the same company, you could probably negotiate to pay reduced fees on the annuity investment as they received fees on the original investment. It is definitely worth negotiating.

You also need good advice about whether to purchase a guaranteed annuity or whether to invest in a living annuity. A guaranteed annuity will pay you a set income for the rest of your life, but the income dies with you.

A living annuity is when you are invested in a fund and can select how much you draw down each year. You can draw down between 2.5% to 17.5% of the capital each year. If you die, any capital is paid to your beneficiaries, but if the money runs out, there is no more income, which could leave you financially destitute.

Can you finance a car for someone else?

Lawrence asks:

My wife is not working and I want to buy a car for her. I do not have a licence, but she does. We are in a civil marriage. Would it be possible to get finance for the car she needs?

CITY PRESS REPLIES:

According to Absa Vehicle Finance you can buy a car in your name for your wife to drive, even if you do not have a driver’s licence. You cannot, however, buy it in your wife’s name as the car is collateral on your loan.

It must be noted that financing the car of a person who does not have a driver’s licence does have some stipulations, according to Henry Botha, head of strategy & business analytics at Absa Vehicle and Asset Finance:

There are instances when the bank will grant finance to an individual without a driver’s licence and they can elect a nominated driver. This will be considered under the following circumstances:

. The nominated driver is a spouse, parent or child residing at the same address;

. The purchaser does not have a driver’s licence for medical reasons (such as blindness or a disability) and the vehicle is to be driven by the nominated driver; and

. The purchaser has employed the nominated driver to be the designated driver.

All the normal terms and conditions will be applicable when applying for the vehicle finance, including:

. The signed application form from the nominated driver – so that they are aware that they are the nominated driver;

. The nominated driver’s ID and licence; and

. Verification that the nominated driver is listed as the regular driver on the insurance policy.

Botha says when a vehicle is registered (and financed) in one person’s name and another makes payment instead, this is considered a third-party payment.

The bank does not facilitate such a transaction as the person who purchases/finances the vehicle should be the registered owner and responsible for repayments.

“In this instance, the wife of the individual who has made this enquiry is unemployed and thus will unfortunately not qualify for vehicle finance”.

Can I take out a mortgage with my siblings?

Soyisile asks:

My two brothers and I wish to buy the house we are renting by combining our salaries.

Can we do that?

CITY PRESS REPLIES:

You could apply for a joint bond. These are popular as few people can afford a mortgage repayment on their salary alone. In most cases the applications are by married couples, but there are also many unmarried couples or even friends who club together to buy a home.

However, you need to be aware of the risks. The main risk is that you are “jointly and severally responsible”, which means that if anything goes wrong, you could be held wholly responsible for 100% of the debt.

This would be the case if the other bond holder dies or absconds – leaving you holding the debt.

If you are going to enter into a joint bond agreement, you should have a legal document drawn up to protect yourself financially.

Mpho Ramatong, FNB home finance division channel head for housing schemes, replies:

Lenders do offer consumers an opportunity to apply for a bond with two or more parties. These individuals would co-own the property and share the responsibility to honour monthly home loan instalments.

When evaluating joint bond applications, banks adhere to normal credit and affordability assessment criteria. However, the difference is that the profiles of all the co-applicants as well as their combined income is taken into account.

A few tips for individuals considering to co-apply:

. Good credit record – although you will be applying jointly, it is still essential for all parties involved to ensure that they maintain a good credit record to qualify and get a favourable interest rate;

. Financial discipline – all parties should be financially disciplined when honouring monthly home loan instalments. A setback from one individual can potentially compromise all parties, while negatively affecting their credit records. Furthermore, the monthly home loan instalment has to be debited from one account. Therefore, an agreement will have to be reached about whose account should be used. This particular account should always have funds available on the instalment date;

. Alignment of objectives – all parties entering into the agreement must share common objectives to avoid complications. For example, if you are buying a family home and one member decides to pull out of the bond agreement, a new bond application will have to be processed and a full credit assessment conducted on the application to verify affordability; and

. Unforeseen risks – all parties should consider having life and disability cover to ensure that the home is protected should an unforeseen event occur. Although this is a standard requirement for some banks, it might not be a condition for other lenders. Therefore, the onus is on the applicants to ensure there is cover in place.

How long before a pension pays out to my beneficiaries?

Bozena writes:

I would like to find out about the expected waiting period for a death claim on a retirement fund. The fund rules say it could take up to 12 months, but why so long if I specify the beneficiaries?

CITY PRESS REPLIES:

Under the Pension Fund Act the trustees have a duty to ensure that the funds are paid out to all financial dependants. This means they can supersede your nomination form.

Basically, a nomination form is only a guideline. By law the fund has up to 12 months to complete a full investigation and issue a trustee resolution to specify who will receive the proceeds.

If you have specified all your financial dependants on your nomination form and included up-to-date contact details for them, the process can be fast-tracked and resolved within a few months.

If you have other financial dependants that you have made provision for in other ways that do not require your pension assets, you can stipulate that in your will. However, it is still up to the trustees to decide.

If you have financial dependants who would be unable to make it through a few months without the retirement payment, you should consider taking out life cover which can be paid out in a matter of days.

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August 18 2019