Mortgage Information
We hope that this will shed some light on the purchasing of a new home and what happens "behind" the scenes. Should you require any more information please do not hesitate to contact us. Our helpful and very professional property consultants will get back to you a.s.a.p.
What is a mortgage?
The pledge of a property as security for a loan.
What properties qualify for a mortgage loan?
The property must be mortgageable and must fall under the urban, freehold, leasehold (99 year) or sectional title banner. Further the property must be located in an urban residential suburb of South Africa.
What is a mortgageable property?
A property which allows the buyer to apply for a home loan and use the property for security for said home loan. The following properties can be mortgaged:
Constructed and completed
- Houses and flats
- Town houses, Cluster homes and Sectional title units
- Semi-detached houses
- Holiday or Second homes
Dwelling to be constructed
- Small-holding of up to 8.5ha
- Vacant stands
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What is the maximum home loan I qualify for?
Take your joint gross monthly income and multiply it by 30% (or 25% if you're single), this will give you the maximum monthly repayment you qualify for.
This 25% or 30% of monthly income is calculated in order that your other monthly expenses can be sufficiently met from the balance of your monthly income, thus avoiding future financial difficulties.
Affordability
It is important to bear in mind that the amount you qualify for and the amount you can afford may differ. When budgeting for a home loan, remember that there are other costs that need to be provided for, for example your insurance premiums on the house etc. Monthly expenses vary from household to household and it is important for you to look at your budget to determine affordability. Remember too, that a common mistake made by buyers is to calculate their maximum affordability limit not making provision for future interest fluctuations and other monthly home ownership costs.
What are the costs involved?
These costs can differ from situation to situation, but listed below are the common costs. Please ask your property consultant or home loan consultant to prepare and estimate of costs for you.
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What documentation is required when applying for a home loan?
- For Individuals (single or married)
- For Close Corporations
- For a Trust
For a Company For individuals either single or married, a copy of the Identity Document and proof of income is required. Prior to registration of transfer, a copy of the marriage certificate and a suretyship, if applicable, would be required.
For a close corporation, a list of all the members, copies of each members' ID, statement of assets and liabilities, balance sheet, trading account and income statement would be required. Prior to registration of transfer, a copy of the founding statement, resolution and a suretyship as signed by all members, if applicable, would be required.
For a trust, a list of all the trustees, copies of each trustees' ID, proof of income of trustees and statement of assets and liabilities, would be required. Prior to registration of transfer, a copy of the trust deed, resolution and a suretyship as signed by all trustees, if applicable, would be required.
For a company, a list of all the directors, copies of each directors' ID, statement of assets and liabilities, balance sheet, trading account and income statement would be required. Prior to registration of transfer, a copy of the memorandum of articles and association, resolution and a suretyship as signed by all directors, if applicable, would be required.
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Bond Registration Overview
Parties involved in the sale/purchase of a property:
- Buyer
- Seller
- Estate Agent
- Conveyancing / transferring attorney (appointed by the seller to attend to the transfer of the property into the buyer's name
- Bond Attorney (appointed by the bank, which granted the home loan
- Cancellation Attorney (appointed by the bank canceling the seller's bond)
Stage one
The bank approves the bond and issues instructions to the Bond attorney to attend to bond registration.
Stage two
The bank approves the bond and issues instructions to the Bond attorney to attend to bond registration.
Stage three
The seller instructs the Conveyancing / transferring attorney to attend to registration of transfer of the property.
Stage four
Bond attorney makes contact with the Conveyancing / transferring attorney and advises the amount available for guarantees and request draft deed of transfer and guarantee requirements.
Stage five
The cancellation attorney is instructed to cancel the seller's bond on receipt of a guarantee for the amount owing on the bond.
Stage six
The Conveyancing / transferring attorney receives the title deed and cancellation figures and forwards a copy of the title deed along with the guarantee requirements to the Bond attorney.
Stage seven
The Bond attorney attends to the preparation of the bond documentation and the relevant account. The buyer is requested to sign the documentation and make payment of the costs. The Bond attorney then prepares and issues the required guarantees and forwards same to the Conveyancing/transferring attorney and prepares the bond documents for lodgment at the Deeds Office.
Stage eight
Upon receipt of the guarantees, they are forwarded to the Cancellation attorney.
Stage nine
The Cancellation attorney obtains consent for cancellation from the bank holding the sellers' bond.
Stage ten
After all documentation has been signed and all costs paid, the transfer, new bond and cancellation bond documents are prepared by the relevant attorneys for lodgment at the Deeds Office.
Stage eleven
Ideally all documents are lodged simultaneously at the Deeds Office. The Deeds Office takes roughly two to three weeks to check the documentation before they are ready for registration by all the attorneys on the same day.
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