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The need to know: Home Bonds

How bonds work?

First of all, what is a bond? Well, a bond is a loan for which your house functions as collateral.

When a potential property buyer borrows money for the purchase, the actual property becomes security in the event that the repayments are not made.

When you take out a bond, you are required to pay back the loan with interest over a set period of time.  This is usually over 20-30 years.

If you fail to pay back the loan, the bank where you took out the bond will then take possession of the property, and then it will go through a process called foreclosure.

 

How do you get a bond?

Usually after the offer to purchase has been signed, it’s time to apply for a bond.

The most important thing to know about applying for a bond is to understand that it’s important to shop around for the best deal that suits your needs.

You can shop around whether you have or haven’t applied for pre-qualification.

Qualifying for a bond

In order to qualify for a bond, you need to meet a few requirements:

  • Be over 21 years of age
  • Have been employed permanently for a minimum of 6 months
  • Have no judgments or defaults on your credit profile
  • Earn above the minimum salary requirement as set out by your chosen bank

 

Mortgage Originators vs. The Bank

This is usually more about preference.

Mortgage originators are usually seen as “the middle man,” so, if you’re not the middle man type and prefer going through a familiar setting, then the bank is for you, but mortgage originators can be very helpful, for example, they will be able to cover all the banks on your behalf with one application.

 

Relevant documents that you will need

Now that you know where you want to apply for your bond, you will need to get the following documents in order.

  • Proof of income
  • Copy of your South African ID or passport
  • Copy of signed Offer to Purchase
  • Proof of current residential address

Official salary slip or stamped bank statement (either option needs to show history for the last 3 months)

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