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What is a Mortgage (Bond/Home Loan)?

Monday, February 26, 2018

A mortgageable property allows the buyer to apply for a home loan by using the property he buys, as security for obtaining the home loan. In other words, if you don't repay your home loan, the bank will take your property to recover its losses. Home loans are usually repayable over 20 years. Some banks allow you to pay it over a period of up to 30 years, depending on the amount of the loan and your financial situation, but this is a costly alternative in the long run.

Sourcing the Finance with which to Purchase Your Home.

There are very few people who are fortunate enough to buy a home for cash. Most people have to borrow money from a financial institution:

Home loan finance is a major part of a bank's business.

Installment Sale
An instalment sale is a way of selling property whereby the buyer purchases the property directly from the seller and pays it off, to the seller, in instalments. In essence, the seller is financing the property for the buyer.

Other Financial Institutions
These institutions are not banks, although they specialise in home loans. They fund loans through the process of securitisation, and often charge a once-off admin fee instead of monthly admin fees.

There are different kinds of home loans.

All the banks have different home loan products, some are for first-time home buyers, others have an access facility, meaning that you can access the surplus money in your home loan. There are many other home loan options available. Ask your banker to explain all the different options to you, so that you can choose a home loan that is suited to your individual needs.

What is a Residential Mortgageable Property?

Residential mortgageable properties are those located in any residential suburb in the Republic of South Africa.

Mortgageable properties include:

  • Vacant stands;
  • Dwellings still to be constructed;
  • Houses (also in the security estates);
  • Holiday or second homes;
  • Cluster homes;
  • Sectional title units;
  • Flats;
  • Townhouses;
  • Semi-detached houses;
  • Duet houses;
  • Residential property used for business purposes;
  • Agricultural Holding (up to a maximum of 8,5 hectare).

Mortgageable properties do NOT include:

  • Farms;
  • Agricultural Holdings (in excess of 8.5 hectare);
  • Blocks of Flats;
  • Share block schemes;
  • Timeshare (where you do not actually own the property);
  • An unconventional construction.