pension Backed Housing Loans (PBHLs) are now a major component of the industry of pension funds as
They give their members the opportunity to make use of their pension
savings or benefits (fund credit) to purchase immovable property
including flats, houses and apartments or to construct
improvements to their homes. PBHLs are now very popular
Namibia and are mainly used to improve the home.
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projects (i.e. projects (i.e.) as opposed to purchasing new homes,
due to the fact that the amount of loans may be very as small. Do the members of
pension funds actually know the way PBHLs function?
To give members more information on this
In this issue, we will discuss the following:
1. The law and the purpose of these loans;
2. The conditions for a loan to be granted
3. Types of PBHLs;
5. A few important points to consider Considerations to consider
6. Observations by the Regulator.
The law and the purpose of these loans
PBHLs are permitted and controlled under the terms of section 19(5) of
The Pension Funds Act of 1956 (Act No. 24 of 1956) (“the Act”).
The Act provides that a loan is made to a person through an
pension fund is an investment made by the fund into the members
for the person to:
Repay or settle a loan that was granted to the borrower by
A different party, like the building society or a bank an unmovable
property. Immovable property is a term used to describe things like houses,
flats, apartments, or land where a home or flat is built or
Apartments will be built.
You can buy a home (which is another term for a home, a apartment or
an apartment etc.) or land on which it is assumed that there will be a residence
The structure will be constructed by the spouse of the member or spouse
Create renovations, modifications, or modifications to the member’s
The house is currently in use.
That means the Pension Funds Act allows funds to make gifts
the members of the association however, only according to the conditions set forth. When a
If a person who applies for PBHL when a PBHL is requested, the applicant must be aware that the PBHL must be
that are repaid to the funds. The loans are made to help with housing
It is not to be used to permit members to engage in use or abuse
get their retirement benefits earlier.
The loans have to be
In full, the loan is repaid when the member retires to ensure the member receives their final
Retirement benefit is replaced to its maximum value. It is important to note
The Board of Trustees of a the fund has a duty to
to report any alleged abuse in these loans NAMFISA.
The conditions for a loan to be approved
Members can receive financial aid in the shape of
A “direct loan” from a retirement fund or a guarantee (i.e.
“indirect loan”) to guarantee a loan from a third party. A guarantee is
A commitment by the fund to make payments for your home-loan in the event that you do not pay
Do it you.
The direct and indirect loan are permitted only in the following circumstances:
1. It belongs to either the owner or his spouse;
2. The house must be occupied by a member or the
3. The loan you receive is not greater than 90 percent of amount.
of the property, or 90 of the savings of the fund
Whichever is less. If the cost of the property you’re interested in is
N$500,000 and you’ve saved N$400,000, the maximum
A loan that you can get with the funds is 90% N$400,000, which is
If the person is looking for an loan to purchase land or other property, the
The owner must be able to build a home on the land, and in
in the near future, and will be in the hands of the member or his/her
dependents. Circular no. PI/PF/3/2003 says that a fund can
Not to make multiple loans to one member at any one time.
In other words, if a family member has a debt to the fund to pay for a home loan then s/
He is not able to take out a new loan. PBHLs are only available to borrowers.
It is granted to cover housing-related costs and is not able to be used for any other purpose.
other reasons, like buying of cattle, cars or paying off mortgages
The loan amount should be paid back over a time of
not exceeding not more than. The maximum repayment period allowed is not more than 30 years.
The rules vary from fund to fund So please make sure you know the difference.
the maximum period of repayment is the maximum period that your account allows.
Types of PBHLs
Direct housing loan schemes is one in which a bank gives
A member can get a loan for housing directly from the funds of the fund.
Direct loans are given to members (by the fund) that are
that is taken from the members saved in the fund. For instance,
If a member has a credit on their account of N$50,000, and takes out a loan
N$20,000 to make renovations. This would mean that members
The benefit of this fund is diminished to the amount of loan, and the loan amount will be paid
transfer to the member who will ultimately reduce the assets of the member. This reduces the assets of
Fund. The interest rate for such loans as set by
The Act amounts to the Namibian Prime rate, plus the rate of 4 percent. In the present,
The principal rate of 10.75 percent, which means that a person will pay
to repay the loan with the rate of 14.75 per cent over the course of the loan.
of the of the. In a monthly schedule, the employer will subtract the
monthly instalments due for the loan are due from the member’s
The monthly salary is later transferred into the trust fund, on behalf
There are funds that have enacted “indirect”
mortgage loan schemes for their customers. Indirect loans are
mortgages provided by a third-party, typically an institution to
member. The member makes contributions in the fund
as to secure as security for. In the event that the loanee
If the loan is not repaid or resigns from the fund in default, the bank will call
on the guarantee that was issued to pay off the loan, and the remaining
The amount will then be deducted from the fund credit of the member.
prior to the time that benefit will be distributed to the participant should it be
and the funds. Like direct loans, they are made on an annual basis
The employer will deduct the monthly installments due to
the loan is taken from the member’s monthly salary . These are then
transferred to a 3rd party (e.g. an institution like a building society or bank) on behalf of
of the borrower.
The rates of interest for indirect loans is typically
that are linked with the primary rate however, the funds are in a position to negotiate
Banks offer favourable rates.
Rules of the Fund
If you are interested in applying to be a PBHL:
First, determine if your institution has a provision in place for these loans to be given to members.
If your fund has an housing scheme then you must
to determine the maximum amount members can take out. Amounts
the amount that members can borrow can differ between funds, but
It is not allowed to exceed the maximum allowed by the Act.
Certain funds permit their members to borrow up to 50 percent
of their savings, but as stated earlier, the funds differ from one to fund
fund. For instance, if the fund permits you to take out loans up to 50 percent, you can borrow from your
of your credit to fund the purpose of a home loan and you also have a fund credit
in the amount of N$200,000. It would allow you to of N$200,000. This means that you can only borrow of up to
N$100,000 for housing.
If you are aware of the job then you’ll most likely be offered the position.
More details on the steps you need to take for you to more information on the steps to follow in order for you to
The loan was granted.
Most often, a member is required to finish the PBHL
Application form and send quotes for the work to be
that is executed on the home or alternatively a deed purchase or sale agreement
that is entered into by the participant and the company that sells them the
property or house. If you are planning to remodel your home, you’ll
You must prove that the property is owned by you or you are the owner.
spouse, and the home in which you, your spouse, or dependents reside in it.
Some important considerations
If a member chooses to draw money from their account
For housing reasons, please verify the most current value of your
Current fund credit as well in educating yourself on the guidelines of your fund’s
housing loan scheme to ensure you can confirm that the maximum amount is
The maximum loan amount you wish to take out will be sufficient
for anything you wish to accomplish (i.e. to buy a home or
the land for improvements or to build).
Members are advised to be cautious.
Consider the following factors before making a decision to apply for a home loan:
The kind of loan that they can apply for . A borrower has to choose which
the type of loan they would like to seek the fund. A member
is to consider the type of loan that will provide him with the most advantages
to find the lowest cost. Members will have to research
and discover the interest rate is for each kind of
Housing loan prior to the time an application is submitted.
Affordability – Taking a look at your monthly or yearly budget
can help you figure out what you are able to afford to spend
In loan repayments, thus aiding you in deciding on the right loan
length and amount of the loan that be suitable for you.
Be sure you can manage the monthly payments
for the duration of the loan during the loan’s duration, especially if rates are expected to increase
up. Be aware that interest rates will not always remain the same
If they do rise, you’ll be required to make a larger payment on your loan
Additional expenses are in an addition to your monthly loans
In addition, there are expenses like travel costs, school fees,
Housing Loans –
Insurance premiums are used to pay for damage or damage to the structure
of the house that is, the maintenance cost for the house, the cost of maintaining the municipal and
Other expenses like taxes and rates other costs like electricity, water security
All of these should be taken into consideration. It is essential for members to
plan your budget well to prevent unwelcome surprise costs.
Financial situation of the present member should be able to
take into account their financial situation prior to applying for the loan.
home loan. It’s easy to apply for a loan , while you’ve forgotten your
Future plans like getting married, or the cost of caring for
the baby due or the unexpected expenses for events like
like the death of a family member or any other loan that could cause the pressure on
your financial situation. You’ll need take a look at your financial situation in general
And make sure that if you decide to take out the loan you have space
to cover unexpected costs or expenses for living.
The term or length of the loan. duration of the loan is an important factor.
an important factor in determining the price of the loan
and also the payment amount you have to pay in the event of a
on a monthly basis.
Please be aware that the longer you stay on the contract is, the more
the loan will be and the loan will be repaid in the form of the monthly repayment.
the installment the installment. If you decide to pay the loan off over a
A shorter time period shorter term, the cost to borrow will be lower than
the longer-term time. Additionally the more short the term is the
The higher the monthly payment higher the monthly repayment.
Rates of interest – Members have be aware of current rates
rate of interest and future developments in interest
If the interest rate goes higher, the member’s payment will be delayed.
The amount will also rise, thereby increasing pressure on
the monthly income of the member and spending plan. If they
The member’s payment amount will decrease as well.
lessen, which gives some relief to the individual.
Comments by the regulator
Certain abuses have caught the attention of the Registrar.
members are asked to adhere to the law in accordance with the
The Registrar will be quick to investigate and report any issues
Abuses of the relevant authorities. There are a few instances of abuses that have been reported.
Members who use PBHLs to pay off loans to be used for
Other than for other than for e.g. settlement of car and other debts. PBHLs
These are not permitted to be used for any purpose other than those of housing, as specified by
the Act. These loans should be used for residential purposes only. A
the borrower cannot take advantage of the loan to purchase food, vehicles, or livestock.
or for any other reason.
The loan should not be granted to an individual for any other purpose.
participant in speculation on the market for housing and property member for speculation in the housing market
The person already has the house or houses.
The giving of PBHLs with the help of funds to be used for
purchase of holiday cottages, or rooms for children
This isn’t in line with the purpose of studying
the house, as stipulated in the Act. The loans are required to
legitimate housing requirements of members as well as
The grant of PBHLs through funds to members in cases where
Properties concerned don’t belong to the members , nor do they belong to their
spouses or aren’t occupied by the dependents or member of
It should be noted that the regulator has the power to and will make use of its
the power to bring civil action against the perpetrators in order to secure
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