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Thread: Rudco Homeloans at 6%

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    Site Caretaker Dave A's Avatar
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    Rudco Homeloans at 6%

    Questions are being asked how Rudco is going to finance homeloans at 6%. But reading this article, it seems that is not the only question here.

    More questions are being asked than answered about a little-known company that launched a home loan product this week offering a fixed interest rate of six percent on a 20-year bond.

    This is seven percentage points below the current prime rate and 0.9 percentage points below the inflation rate. If you borrowed money at six percent, you could invest it in cash and earn almost three percentage points more.

    The very best variable interest rate you can obtain from a bank or home loan finance company is 2.5 percentage points below the current prime rate of 13 percent. The average home loan rate is about 1.6 to 1.7 percentage points below prime, but fixed-rate home loans attract higher rates.

    Rudi Visagie, a director of Rudco Finance Company, says that his business model is all about strategy and that "maybe" he has enough money to offer the six-percent rate to 1 000 home loan applicants. He says he does not have enough money to finance the entire home loan market, and perhaps after six months he will change the interest rate Rudco is offering.


    The repo rate - the rate at which the Reserve Bank lends money to commercial banks - is 9.5 percent.

    Visagie confirmed that applicants who want a home loan from Rudco will have to pay an initiation fee of R5 700 including VAT. This is the maximum initiation fee allowed in terms of the National Credit Act.


    Documents from a Rudco agency state that if you want to switch an existing home loan to Rudco, you will have to pay the first two monthly instalments on the new bond to Rudco and continue paying instalments on your existing bond. Only after the second instalment will Rudco start proceedings to switch your bond by requesting cancellation figures from your bank or finance house.

    Industry sources say banks can take up to 90 days to provide you with a final home loan settlement figure. This means you could have to make five instalments to Rudco before it grants you a loan and settles your existing bond.

    But Visagie denied that this is the case and says instalments will have to be paid only "once you sign a mortgage contract".

    Visagie confirmed that Rudco offers agents R1 000 for every bond they sign up for Rudco, as well as commission of 10 percent of each instalment paid during the life of the bond.

    According to industry sources, bond originators usually earn a one-off amount of between one percent and two percent of the bond for securing a bond for a financing company. This would amount to significantly less than Rudco's ongoing payments.
    full story from Personal Finance here
    The trouble with opportunity is it normally comes dressed up as work.

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    just me duncan drennan's Avatar
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    This whole story seems a bit odd. Anyone got any ideas what strategy could make sense? Maybe the goal is to get hold of title deeds?
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    Quote Originally Posted by dsd View Post
    This whole story seems a bit odd. Anyone got any ideas what strategy could make sense? Maybe the goal is to get hold of title deeds?
    Hi Guys I am new to the forum but do know about Rudco. I will give all the information I have.

    The first line of defence for financial industries if they feel threatened is to attack any new business that will take away some of their market share. And this is a classical example. We also know that you cannot believe everything that the newspapers say because most of them have people from the banks etc envolved, I know I have been their working for the bank for 15 years. If Rudco has been doing business for a year why only now are they querying the business, or have the banks only now realised that they pose a serious threat and will stop at nothing to discredit them.

    About Rudco.
    The R5700 so called initiation fee that they charge is not uncommon. The banks also charge an initiation fee but they add this onto your bond. Sources say that the banks will also be increasing their amounts to about the same amount in an effort to make up for the loss in income due to the new credit act. Their are a lot less loans being granted as a reult of the new act and they have to make up for it and already their is signs of increased costs.

    6% ??? What the big financial guys are not mentioning is that their are various ways of getting finance at those rates, and anybody with internet can do some research, I do not know if they are using this but one way will be by "ASSET SECURITIZATION" and a lot of the major banks are using the same system Deutche Bank is one of them. It is common practice in USA but I do not think that it has been used here, maybe for that reason all the sceptics are jumping in.

    If you read the articles one major concern is that if this works that is will seriously impact on the reserve banks inflation targets, and put our banking system in shambles. And maybe that is the reason for all the negative publicity, what better way to stop your business from loosing money than to discredit your opisition.

    I know that there is definite ways of doing this, I just think that nobody has ever had the guts to come out and take on the big boys.

    After speaking to some of the guys, I can honoustly say that they are realy trying to help the public, The loan agreements that the clients will sign has also been studied by a few attorney firms and no irregularities were found.

    I say - if their are people out their that want to make a difference, give them a chance.

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    just me duncan drennan's Avatar
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    I think it is really interesting, I just don't understand it at all. The problem (from an uneducated point of view) is that it looks too good to be true. I really would like to understand how their system works.

    What are the implications for inflation and the reserve bank?
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    Quote Originally Posted by dsd View Post
    I think it is really interesting, I just don't understand it at all. The problem (from an uneducated point of view) is that it looks too good to be true. I really would like to understand how their system works.

    What are the implications for inflation and the reserve bank?
    The implications for the reserve bank is that if Rudco can provide loans at 6% a lot more people will be able to afford loans and that will increase the money supply in the country. It is difficult to explain but a person who studied economics will understand. This will mean that their is a lot more credit causing inflation to rise, I also suspect that it will have a huge impact on property prices.

    Maybe I can also try and explain he possible system- if they are using it.
    Take SA Homeloans for instance they do not use monye from banks or the reserve bank. The pool their homeloans together and get finance on the money market. Investors then get a return from the monthly bond repayments.

    Now in Rudco's case- Say they are acting as agents for an international company and they issue "mortgage backed securities" they can get funding at rates that less than the reserve bank. Japan currently has a lending rate of only 0.25% a ten year "Samurai bond" has a return of +- 2.85 %. This means that international investors can get higher interest rates and they fund the bond being issued in SA. It is a lot more complicated but should give you an idea of what is possible. Banks all ove the world are using the same system.

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    Site Caretaker Dave A's Avatar
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    Welcome zulu. And thanks for filling in some background. Very much the purpose of raising subjects here in the first place - to give people the opportunity to have their say and hopefully make sense of things.

    The SA Homeloans scenario came to mind for me when I first saw this. The main trick there was to target low risk clients. As long as bad debt was kept out of the equation, there was (still is I'm sure) more than enough money in the markets happy with the return.

    The idea of obtaining off-shore finance is interesting. The risk there is now you have to factor in exchange rate movements in establishing your margin. Not for the feint-hearted!
    Last edited by Dave A; 10-Jul-07 at 03:19 PM.
    The trouble with opportunity is it normally comes dressed up as work.

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    Quote Originally Posted by Dave A View Post
    Welcome zulu. And thanks for filling in some background. Very much the purpose of raising subjects here in the first place - to give people the opportunity to have their say and hopefully make sense of things.

    The SA Homeloans scenario came to mind for me when I first saw this. The main trick there was to target low risk clients. As long as bad debt was kept out of the equation, there was (still is I'm sure) more than enough money in the markets happy with the return.

    The idea of obtaining off-shore finance is interesting. The risk there is now you have to factor in exchange rate movements in establishing your margin. Not for the feint-hearted!
    Exchange rate changes is a risk, but as with every good system you must have a plan B, and with the possibilities that I have listed before, they all have built in securities" and their is also aspect like forward cover which you can purchase to make sure that the value of the rand against the foreign currency does not change during the period.

    Their are many other ways if the finance guys would just do some research before making negative statements.

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by zulu View Post
    Their are many other ways if the finance guys would just do some research before making negative statements.
    Well for me it was more a case of ^^ raised eyebrows than being negative. It certainly is interesting!

    I think, given that they are stepping quite far off mainstream rates, Rudco should not be surprised at all the questions from the mainstream players, and more than a little curiosity from folks such as me.

    With any luck they don't view it as negative comment (unless they do happen to have something to hide) - and it certainly is doing some good marketing mileage

    An old saying - there's no such thing as bad publicity.
    The trouble with opportunity is it normally comes dressed up as work.

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    Email problem RKS Computer Solutions's Avatar
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    Zulu, I agree with you completely... Maybe I should post to my main page a conversation I had with Axiz because the other retailers in SA was complaining that I was selling Asus Motherboards to the public at a cheaper price than what they were buying them for from Axiz...

    What no-one is realising is that there are never just one big player, if someone comes to the plate with a better way of doing things, and have better backup in place and can actually give a better service for a better price, they should be given a chance...

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    I have been in contact with a few of the agents, They are certainly not detered by the negative comments. And dont seem to be hiding anything. They said that they are going full steam ahead with their marketing campaign.
    I think that there are a few "BIG BOYS" that are realy worried about what will happen to their profit margins if this works.
    After speaking to the agents it seams that Rudi Visagie did give information to Raport, he even informed them to read the Raport as it was going to be positive-but in stead everything he said was published incorrectly with everybody giving their own version.
    My personal opinion is to let them show us what they have got. If this works it will transform the way our financial industry work and will certainly give us other options than the big finance houses that own the monopoly.
    before passing judgement make sure of the facts.

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