TUHF PRODUCT

Intuthuko Equity Fund

The Intuthuko Equity Fund (IEF) is a development finance company that provides equity financing to support entre­preneurs who wish to enter the residential rental property market but face funding constraints. Intuthuko provides these emerging entrepreneurs (who must also qualify for either a TUHF or uMaStandi senior mortgage loan), with equity in the form of a subordinate concessionary loan.

The IEF provides an opportunity for individuals who want to become active in property investment but lack the resources. IEF enables access to funding for entrepreneurs that have traditionally been overlooked by banks. While the fund gives people access to funding, successful applicants also need to commit their own money to ensure they remain focused on effectively managing and maintaining the property and meeting their obligations.

Eligibility requirements to access IEF funding

• The entrepreneur’s project must be located in the inner city or near city suburb and identified townships as per areas of finance.
• The entrepreneur should have already approached the seller or owner, and the property should be purchased with no liabilities transferred to the new owner.

 The entrepreneur must:

• Have an alternative source of income display a willingness to take feedback through mentorship and follow a path of continuous learning.
• Demonstrate a tenacious spirit in the ongoing management of the property over the long-term.

What is equity?

What is equity?

For commercial investment property transactions, there is a loan portion and a portion that the investor provides in the form of cash. The days of receiving 100% loans are long gone. Instead, investors must provide a portion in unencumbered cash that constitutes as much of their own savings as possible to create equity in a project. 

What is mortgage bond?

A mortgage bond is typically provided by a financial institution and used to purchase a property. This constitutes an interest-generating loan that is repaid monthly over a fixed period. In the case of TUHF mortgage bonds, this period is a maximum of 15-years. The loan is secured against the property. 

What are the other considerations when it comes to determining the LTV ratio?

A property consists of more than just the purchase price. There are additional costs to factor in. For instance, the conveyance fees to transfer a property into someone’s name, the bond registration fees, and then other considerations like construction and refurbishment. 

For our part, TUHF creates a product for every project whether someone is looking to buy or redevelop a property. We factor in all these different components to determine a total project cost. 

Is a mortgage bond just limited to buying a property?

Unlike traditional financial institutions, TUHF extends this beyond the purchase of a property. We also fund construction and refurbishment projects. Additionally, we look at inner-city projects and have recently expanded this to include in-city areas that cover a greater geographic footprint outside a CBD. 

TUHF continually develops new products in line with market demands

Are there other influencing factors when it comes to the LTV?

Our focus is on what we call the loan to value (LTV) ratio. This is the maximum loan that can be extended to a customer. In the past, this could be up to 80% of the value of the loan. However, given the challenging economic market, we no longer do this. Instead, we focus on the LTV, which can vary from project to project. The LTC value depends on the cash flow of the investor, the valuation of the project, and the price

For instance, once a seller receives an offer to purchase, they must get a rates clearance certificate. Depending on the size of the property, few sellers might have access to the amount of funds required for the certificate to be issued. If the purchaser has applied for a TUHF mortgage facility, we can assist as this is a critical step in the process to facilitate the change in ownership. 

In our example, the seller might make R5-million from the sale of the property with the rates clearance coming in at R1-million. TUHF will loan the R1-million to the seller and recoup the outlay plus interest from the sales proceeds. The transferring attorneys appointed by the seller will then be requested to transfer the funds once the guarantee has been lodged for the property. 

What percentage of a loan does TUHF typically award to someone?

Our focus is on what we call the loan to value (LTV) ratio. This is the maximum loan that can be extended to a customer. In the past, this could be up to 80% of the value of the loan. However, given the challenging economic market, we no longer do this. Instead, we focus on the LTV, which can vary from project to project. The LTC value depends on the cash flow of the investor, the valuation of the project, and the price

For instance, once a seller receives an offer to purchase, they must get a rates clearance certificate. Depending on the size of the property, few sellers might have access to the amount of funds required for the certificate to be issued. If the purchaser has applied for a TUHF mortgage facility, we can assist as this is a critical step in the process to facilitate the change in ownership. 

In our example, the seller might make R5-million from the sale of the property with the rates clearance coming in at R1-million. TUHF will loan the R1-million to the seller and recoup the outlay plus interest from the sales proceeds. The transferring attorneys appointed by the seller will then be requested to transfer the funds once the guarantee has been lodged for the property.