For many of us the various aspects of what makes up a mortgage bond ("bond") are vague and can lead to insecurity, particularly for first time buyers. In the article below, Peter Blanckenberg (Summercon Director) answers frequently asked questions about "bonds".
What is a bond?
A bond is a written agreement between a borrower and a bank which sets out in detail the terms and conditions of the loan agreement between the borrower and the bank.
Typical clauses include:
- the amount of the loan;
- the applicable interest rate;
- the borrower’s obligation regarding the repayment of capital and interest;
- the procedures used by the bank to recover the loan in the case of default by the borrower.
Registration of agreement
Bonds are registered in the Deeds Office.
A property subject to a bond cannot be sold by the owner without the approval of the bank.
Period of the bank loan
The longer the period of the loan from a bank the more interest shall be paid by the borrower.
Any extra payment by the borrower over and above normal monthly instalments shall substantially reduce the cost of interest over the period of the loan.
Administration required to get a bank loan
All necessary documentation which needs to be completed will be provided to you by specialised Summercon staff with useful recommendations and efficient back-up.
If you choose one of the four following banks, namely, ABSA, FNB, Nedbank or Standard Bank, all your transfer and bond conveyancing costs are covered by Summercon.
Current interest rates
Currently the interest rates being charged by banks are historically extremely low. In short, this is the best time to buy property using a borrowed structure that we have had for many, many years. In addition, prices of property have remained depressed for at least the last 5 years. This combination of low interest rates and depressed prices presents new buyers with an outstanding opportunity to enter the market in close to ideal circumstances.
Should you wish to discuss any aspect of this article please do not hesitate to call me on +27 (0) 11 996 0000.