VBS Mutual Bank, from which president Jacob Zuma secured a R7.8 million home loan to pay for non-security upgrades to his home at Nkandla, has explained its loan processes.<\/p>\n
Questions have been raised about the nature of the loan given the amount of the loan and the age of the president.<\/p>\n
The bank told Bloomberg<\/a> that it sticks to loan processes no matter who the client is.<\/p>\n \u201cIn granting a loan, the usual processes and conditions apply no matter who the client may be,\u201d VBS Mutual Bank chief executive officer Andile Ramavhunga said in an e-mailed statement to Bloomberg on Wednesday.<\/p>\n \u201cThe mortgage bond amount applied for cannot exceed the market value of the property. Furthermore, the applicant must have a proven source of income to service the required installment repayments, which cannot exceed 30 percent of the gross income of the applicant.\u201d<\/p>\n The Johannesburg-based lender won\u2019t release details of clients, Ramavhunga said.<\/p>\n A financial expert earlier this week\u00a0said that, given his age and the structure of his income, it\u2019s difficult to make a case for president Zuma to afford a R7.8 million loan.<\/p>\n The presidency announced on Monday that Zuma, with the help of a home loan from VBS Mutual Bank, paid back the sum of R7.8 million for upgrades to his private residence in Nkandla.<\/p>\n The terms of the deal were not disclosed; however, CEO at Galileo Capital, Theo Vorster, believes there are enough details to make some deductions about the loan.<\/p>\n In an interview with Talk Radio 702<\/a>, he said that if you need a loan of R7.8 million\u00a0\u2013\u00a0and you assume that the loan is linked to prime over a period of 20 years \u2013\u00a0your monthly repayments will be in the order of R78,000,\u00a0under normal circumstances.<\/p>\n \u201cThe president will have to fork out R78,000 every month for the next 20 years in order to service this loan of R7.8 million,\u201d Vorster said.<\/p>\n Talk Show host Bruce Whitfield questioned how many banks would provide a 20-year loan to a 74-year old person of R7.8 million.<\/p>\n Vorster noted that when a bank approves a loan,\u00a0two elements stand out: security and surety.<\/p>\n From a surety point of view, the financial advisor said that the bank would want some kind of bond over Nkandla. He pointed out that the president already has some kind of a bond at First National Bank for Nkandla.<\/p>\n The second point is affordability or\u00a0serviceability. In terms of public information, the president\u2019s salary is at R2.87 million annually, or approximately R240,000 per month.<\/p>\n Vorster noted that because of his age, president Zuma gets certain rebates and\u00a0tax benefits. As a result, his after-tax income is somewhere in the region R140,000 per month.<\/p>\n \u201cOf that R140,000, he now has to fork out R78,000 to the bank, which means his after tax income \u2013 his take home pay drops by about 60%, and that makes the affordability quite difficult,\u201d Vorster said.<\/p>\n The financial advisor raised the question of president Zuma\u2019s age and whether he can service a bond over 20 years, while his after tax income is also questionable.<\/p>\n \u201cIs there reckless lending involved in this?\u201d Vorster asked.<\/p>\n Can Zuma afford to pay R80,000 a month for his home loan?<\/strong><\/a><\/p>\n Zuma has paid back the money for Nkandla<\/strong><\/a><\/p>\n This is how Zuma will pay back the money for Nkandla<\/a><\/strong><\/p>\nMore on president Zuma<\/h3>\n