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Mortgage Bonds

INFORMATION REGARDING THE MORTGAGE BOND REGISTRATION PROCEDURE

A Mortgage Bond is finance borrowed against immovable property, using that property as security for the loan.

The Mortgagor (or Borrower) is the person, Company, Trust, or other entity that borrows money to finance the purchase of immovable property and mortgages their property as security for the loan.

The Mortgagee is the Bank, other Financial Institution or Person who agrees to lend the money to the Mortgagor, and the Bond is thus registered in favour of the Mortgagee.

A Conveyancer is a qualified Attorney who has specialized in the field of dealing with property. Only a qualified Conveyancer may attend to the registration of dealings with property in the relevant Deeds Office. Bond registration documents must therefore be prepared, lodged and registered by a Conveyancer.

A Bond Originator is an independent consultant who prepares a Borrower’s Bond application and endeavor to obtain the best loan conditions for the Borrower with one of the major banks. They earn their commission from the Bank that grants the bond.

Bond registration costs comprise of the fees payable to the Conveyancer for the registration of the bond, disbursements incurred, as well as the Deeds Office charge and Initiation Fee levied by the Bank (where applicable). These costs are payable by the Borrower and levied by the Conveyancer in accordance with the Law Society’s Guidelines, based on the amount of the loan.

(For an estimate in respect of these costs, please visit our website or contact our conveyancing department)

THE MORTGAGOR (OR BORROWER):

  • Must repay the loan amount with interest to the Mortgagee as per the terms of the loan agreement. This is usually over a period of 20 years (240 months).
  • Has full use of the property, although certain restrictions may exist.
  • Has the right to sell and transfer the property, subject to the outstanding amount on the mortgage bond being settled. 

WHAT IF THE MORTGAGOR FAILS TO PAY BOND INSTALMENTS? 

The Mortgagee can exercise its rights by calling up the Bond and obtaining a Court Order to grant permission to hold a ‘Sale in Execution’ after notice has been served on the Mortgagor in compliance with the National Credit Act. This procedure is called ‘Foreclosure’.

WHAT IF THE MORTGAGOR IS DECLARED INSOLVENT? 

The Mortgagor’s estate will be liquidated to defray debts and the Mortgagee will have a preferential claim against the Estate. Other creditors will thus have to claim from the remainder of the estate.

MORE ABOUT BONDS:

  • Bonds can only be granted to the property owner.
  • Couples married In Community of Property must both give written consent to any Mortgage bond being registered.
  • People married Out of Community of Property may each mortgage their own Immovable property without their spouse’s consent.
  • Jointly owned property requires written consent of all the owners.
  • A Bond only comes into effect once it has been registered in the Deeds Office, and not upon signature of the Bond documents.
  • The Conveyancer is instructed to attend to the registration of a bond by the relevant Bank granting the loan.
  • Mortgage Bonds are registered over immovable property, whether improved (i.e. already built on) or unimproved (vacant land).
  • The Title Deed to the property is delivered to the Bank following registration of the bond in the Deeds Office, for safekeeping as long as any amount remains outstanding on the loan.
  • Once a bond has been settled by the Borrower, a formal cancellation thereof may be registered in the Deeds Office. This is also attended to by a Conveyancer.
  • For as long as any amount is owing to the Bank under the bond, the Borrower has to insure the dwelling according to the Bank’s criteria. This insurance may be provided by the Bank itself, or another insurer of the Borrower’s choice.
  • A Borrower may anticipate payment of instalments to the Bank, resulting in settling the loan sooner and saving on interest payable to the Bank
  • A Bank charges interest on the amount outstanding on a bond at a compounded rate
  • A Bank charges penalty interest if a Borrower wishes to sell the property or switch the Bond to another Financial Institution while still owing under the Bond. In order to minimize this penalty interest, a Borrower should notify the Bank of his intention to cancel the Bond as soon as possible, as the penalty interest charged by the Bank is levied upon receipt by the Bank of the Borrower’s intention to cancel and thereafter decreases on a daily basis for a period of 90 days, where after it expires.

INFORMATION & DOCUMENTS REQUIRED FOR A BOND: 

The Mortgagor (Borrower) has to provide proof of identity, physical address, marital status, insurance and assurance; as well as debit order details in respect of the monthly instalment, contact details, and RSA income tax number.

REGISTRATION IN THE DEEDS OFFICE: 

On registration of the property transaction in the Deeds Office, any existing Bond held over the property by the Seller is cancelled and the property is registered in the name of the new Owner (Mortgagor). The Mortgagor’s new Bond, in favour of the Bank, is registered simultaneously. Upon receipt of confirmation of registration, the Bank releases the loan amount in accordance with the Borrower’s Payment Authorization, and the Borrower’s obligation to repay the agreed instalments to the Bank commences.