Business & Economy

Tuesday, 25 February 2020 07:15

Home equity release finance with a twist for retired homeowners


New form of financing set to assist retirees who own properties on Cape Town’s Atlantic Seaboard maintain or improve their lifestyle and “age in place”.

Cape Town – February 25th, 2020.

While not a new trend internationally, a form of loan financing with a unique twist has reached Cape Town’s shores in the shape of a financial services product coined “Freedom Finance” by its originator locally, Water Financial. The plan provides monthly loan payments to retired homeowners to spend as they wish, using their paid-off properties as security. Using an algorithmically determined percentage of what the property is worth, Water Financial’s Freedom Finance is spread over 60 months, and initially is available exclusively to unmarried homeowners over the age of 75 who reside on the Atlantic Seaboard––for the proof of concept pilot project.  “A number of factors are contributing to the escalating cost of living, among them, increased rates and taxes, levies in Special Rate Association areas, increasing electricity costs, security and crime prevention measures, healthcare inflation, soaring food prices and so on,” says Water Financial founder Chris Loker.

“Added to this, people are living longer, and, with the improving quality of healthcare, this trend will accelerate.” For many retirees, incomes have not kept up with increasing costs and many have been compelled to sell their homes, “downsize” and move into complexes or to other suburbs, or in with family members.    “Retirement can be a compromising time and lifestyles are being negatively affected behind an ethos of I’ll just keep working, I won’t treat myself, I can’t spend money on visiting my children and grandchildren. A culture of deprivation, austerity and regret is likely to set in.” says Loker, a former bank and fintech executive. “This is both unfortunate and unnecessary.”

Home equity release products have been used internationally since the 1960s. According to an American Association of Retired Persons survey, 94% of borrowers felt a home equity release product had given them peace of mind and 89% said it gave them a more comfortable lifestyle. “The age in place trend finds more and more seniors are choosing to stay where they raised their families, and they love their homes––they are an emotional as well as a financial investment,” says Loker. Pay-back of the capital loan amount is required only upon the death of the borrower and is payable by the estate and steps have been taken to prevent against runaway debt levels for borrowers.

The loan may be repaid and cancelled sooner if the borrower decides - the owner retains the right to sell the house and repay the loan at any time. “It’s about giving elderly homeowners options,” says Loker. “It requires self-control, but the way the product is structured––unlike typical financiers internationally––it’s designed to protect the borrower and the lender. We encourage family members to be involved in their loved one’s decision, it’s helpful if everyone involved understands the plan.” Loker says Water Financial aims to buck the deterioration in unsecured debt defaults trend, not only by securing the lending, but also by taking an interest in the borrower’s financial affairs and well-being. As part of the offering, the company can help reduce household costs, apply loan amounts to renovations and innovations such as solar panels and water saving devices.

Water Financial grew out of a 2010 project to establish a South African bank driven by a desire to invest money more wisely and sustainably. “We review clients’ income statements and balance sheets and explore generating additional income from their properties by considering Airbnb, for example, or by taking in a tenant. We examine and enhance healthcare plans and advise how our borrowers can use technology to reduce costs and improve their standard of living.” Whilst the product has a negative impact on heirs, since their inheritance is reduced, many welcome their parents affording to live better and appreciate not having to contribute or are simply not able to assist – with some UK surveys showing 80% of children supporting their parents’ decision to take equity release products. Borrowers pay interest only on the amount of cash drawn and interest rates are reasonable. [Ends]

For more information, please contact Chris Loker:

Office: 021 140 3525
Address: Waterfront Pavilion, V&A Waterfront, Dock Road, Cape town
This email address is being protected from spambots. You need JavaScript enabled to view it.

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