AFRICAN UNION FOR HOUSING FINANCE CONFERENCE 8 – 11 SEPTEMBER, 2009 MAPUTO, MOZAMBIQUE Home Loan Guarantee Company HOUSING EDUCATION By Ethel Matenge-Sebesho 1
Housing Education Background Housing tends to be a long-term financial commitment with associated advantages and disadvantages eg : Some employers in an attempt to assist employees to acquire housing, will encourage the use of Pension/Provident Funds as collateral, but when the employees default on the loans, they could lose both property and pension 2
Housing Education Background (continued) Some people, in desperation to acquire housing will do so through micro-loans, which could be costly and short-term to finance a long-term commitment Others, still will purchase property when all they need is accommodation and in most cases they are not yet ready to own property In order to mitigate against all the above issues, people need to be educated, even before they consider any housing/accommodation option 3
Housing Education Introduction This presentation is going to cover the following topics : The importance of housing education The target audience Housing education programs Education and training methodology Tenure options – Advantages and disadvantages Owning Renting Social housing Affordability and Savings Housing Finance Mortgage Non-mortgage Micro loans Contracts 4
Housing Education WHY IS IT IMPORTANT? Facilitates consumer protection Promotes the benefit of home ownership Fosters responsibility Minimises default risk Provides understanding of the housing finance options 5
Housing Education WHO SHOULD BE EDUCATED? Aspiring home owners First time home owners Tenants Train-the-trainers 6
Housing Education HOUSING EDUCATION PROGRAMS Borrower education for : first time buyers mortgage and non-mortgage Home ownership education : Current and potential home owners Tenant education : New and potential tenants 7
Housing Education Education and Training Methodology The following methodologies should be used to achieve the course aims and learning objectives Lectures – provide an information framework Group discussions – increase the level of interaction between participants, which in turn assists in the acquisition of knowledge Role-play – provides an opportunity for practice utilising acquired knowledge and skills Evaluation – provides an opportunity to measure understanding and to consolidate learning 8
Housing Education The learning model Learning objectives should be clearly defined throughout the course so that participants are aware of what they will be learning at each step. Participants should be evaluated after each activity to ensure that their level of understanding is monitored and maintained throughout the course. It is desirable to issue each participant with a certificate of attendance on completion of the course attended. 9
Education and Training Methodology Group Size The high level of interaction between trainer and participants is important and this will restrict class sizes to a maximum of 20 delegates. Simulation exercises, such as budgeting exercise, require this interaction to ensure understanding. Active participation is ensured for each participant because of small group sizes, frequent opportunities to ask and respond to questions, group discussions and structured interaction with other participants. In the case of the Train-the-Trainer course, the high intensity training requirements will limit class sizes to a maximum of 9 delegates to a group. 10
Housing Education Tenure Options Owning by building your own house or buying an existing house Renting from landlord Social housing 11
Housing Education Owning Understand Deed of Sale Title Deed Purchase price Transfer costs Bond registration costs Service connection fees, water, electricity Monthly municipal charges Home loan instalments Maintenance and repairs Monthly insurance premium (home owner cover) 12
Housing Education Advantages of owning Asset and grows in value Can run business from your house Can rent out room and get extra income Can sell the house at a profit 13
Housing Education Disadvantages of Owning Long-term financial commitment Monthly bond instalment, services, rates and taxes Costly to maintain the property Insurance costs May take long to sell 14
Housing Education Renting Understand the lease agreement Rental deposit Monthly lease rentals Utilities expenses 15
Housing Education Advantages of Renting Easier to exit the rented property Not responsible for major repairs and maintenance May run a business from rented premises (subject to prior approval from landlord) Not responsible for rates and taxes No insurance costs on the rented property (but must insure your moveable assets) 16
Housing Education Disadvantages of Renting No financial benefit from monthly lease rentals No accumulation of wealth in the form of asset value appreciation Rent will usually escalate (by 10%?) each year Bound by the terms of the lease, i.e. cannot vacate the property before expiry of the lease 17
Housing Education Social Housing Offers different tenure arrangements : Rent-to-buy (instalment sale) Rent – no arrangement to own unit Co-operatives – ownership shared by members Understand instalment sale or lease agreement In a co-operative, to sign a use agreement Understand House Rules 18
Housing Education Advantages of social housing Living in affordable, good quality housing Be part of a close community Have security of tenure, subject to adhering to terms of agreement In a co-operative, contribute towards the financial growth of the co-operative May be entitled to financial growth in value of property in a co-operative 19
Housing Education Disadvantages of social housing Have to live according to the House Rules Monthly lease rental/use fee will increase each year No title to the property, except in rent-to-buy, where title is only registered after full payment of property value 20
Housing Education Affordability and savings Budget and plan ahead for monthly expenses Use bonus to first pay off debts Avoid opening clothing and other accounts Avoid borrowing money from one person to pay another Save, even if it is a small amount every month Be careful of taking up a micro-loan with very high interest charge 21
Housing Education Housing Finance Understand role of Lender Cost of borrowing money - interest Other costs, transfer fee, bond registration costs etc. Different types of housing finance : Mortgage bond Non-mortgage bond (Pension or Provident Fund backed loan) Micro-loan Need to maintain clean credit record (Credit Bureau) Rights and obligations of a borrower 22
Housing Education Contracts Understand terms and conditions before signing “Cooling - off” period after signing some contracts Be contractually capable to sign contract : be of sound mind not sequestrated be of majority age 23
Housing Education Contracts (continued) Some housing related contracts : Offer to Purchase (Deed of Sale when it is signed and accepted) Builder’s contract Home loan agreement Lease agreement 24
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