Up to 12 people can now apply for a single FNB home loan

• FNB has launched a collective buying home loan scheme, allowing up to 12 people to buy property together.
• The bank hopes that the product will help more low and lower-middle-income earners to be able to afford to buy homes.
• Participants will be jointly liable for the debt, which could affect their credit profiles if other participants don't keep up with their payments. 

FNB has launched a stokvel-type of home-loan product, "an industry first" in SA's property lending market.

The bank's new collective home loan is an attempt to help solve the challenge of the chronic shortage of affordable housing in SA. 

Many factors contribute to the problem, including that new housing stock is too expensive for many people, as well as the perceived risk of lending to middle low-income consumers.

FNB's product seeks to solve the financing challenge. The bank will allow as many as 12 people to come together to apply for a bond. Buyers can team up with eight people, including spouses, when applying through digital channels - or 12 if they apply in a branch through a sales consultant.

The group can collectively decide how much each person will contribute towards the monthly instalment, and FNB said it can easily split the monthly debit order to suit the group's needs.

Even though the product primarily wants to solve the challenge of financing affordable housing, FNB said it has designed it to serve more affluent customers too.

Why collective buying?

"We know that this is something that is already happening. We know of stokvels, people buying properties together to enable access into homes. So, the collective buying value proposition was born from that," said FNB Home Finance Growth Head Mfundo Mabaso.

He said because associating in groups is something South Africans love and do a lot of through stokvels, as well as burial and investment societies, it seemed like a sensible solution to bring to the mortgage space to enable affordability and homeownership.

Mabaso said FNB spent some time testing whether this would work. Its observation of long-term trends confirmed that people who jointly apply for bonds have higher chances of getting approvals.

Vanashree Naidoo, product head of FNB Private Bank Lending, said this product also aims to give low-income earners comfort that should something go wrong, like retrenchment, they will have some financial cushioning and possibly avoid losing the roof over their heads.

Risks and responsibilities

Importantly, once signed, a collective home loan will be a credit agreement like any other. So, applicants will need to go into it with people they really trust and those with strong credit profiles.2m All the buyers will be jointly and "severally" (meaning each person will be responsible for their portion) liable for the debt. The downside of that is that if one person defaults on their monthly instalment - in the case of those who chose to split the debit order across all or multiple participants - the account will go into arrears if the other members cannot settle the shortfall.

"This will negatively impact the credit bureau profile of all participants in that arrangement, as everyone is jointly and severally liable for the loan as the bond and the property will be registered in each of the names," said Naidoo.