Property financing terminology 101

There are various permutations of wording a financing clause in a sale agreement e.g. “pre-approval of a bond application”, “bond approval in principle”, “guarantee”, “undertaking” etc, all of which, have different legal effects and create different rights and obligations, which may be critical in protecting the seller and/or purchaser’s rights.
It is imperative to therefore always check the wording of the financing clause of a sale agreement before signing it, as the risk of not doing so, isn’t worth it. I have therefore, in a nutshell, defined possible terms that one may come across, in sale agreements.

Pre-approval of a bond application:
This is a mere indication to the seller/estate agent, that the financial institution concerned would probably grant the applicant a loan against security of a property to be mortgaged for the amount of the pre-approval. This hardly ever legally binds the financial institution in any manner towards anybody.

Bond approval in principle (AIP):
Here, the financial institution approves the bond in principle, based on the documentation (including the sale agreement) furnished by the purchaser, and the purchaser’s credit history. Once the financial institution has valuated the property, it will then issue the purchaser with a final grant, whereafter the purchaser will be contacted by the relevant attorneys attending to the registration thereof. The attorney will then inform the purchaser of what documentation they require, when costs need to be paid and when documents need to be signed etc. The period from bond application to bond approval to bond registration can take anywhere from 6 weeks to 3 months.

Guarantee:
This is a written undertaking by a financial institution, to pay the seller’s conveyancer a specified amount of money upon the simultaneous registration of the bond and transfer of the property, subject to certain terms and conditions. If the sale agreement specifies a date on which a guarantee must be furnished, then the purchaser is obliged to furnish the guarantee by that date. However, if the agreement does not specify such a date, then the guarantee only needs to be furnished as and when the seller’s conveyancer is in a position to lodge the deed at the deeds office.

Undertaking:
The conveyancer acting on behalf of the financial institution/attending to the bond registration, usually issues an undertaking to pay the proceeds of the bond to the seller, and will only do so, once it is assured by the financial institution, that it will receive the proceeds of the loan (or part thereof) in order to be able to pay the seller, or if the conveyancer holds the funds in trust.

By choosing Mortgage Plus for a loan, you will get that continual service to make sure you are getting the best deal possible.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

If you’re buying a home, you’ll be following the following steps in getting your new bond through Mortgage Plus:

• Arm yourself with information – Use our handy Mortgage Calculators to give you an idea of what home loan you could qualify for and what size mortgage bond you can afford.
• Apply on-line and / or
• Speak to a specialist home loan consultant – Call your closest branch or our Contact Centre on 011.327.4489 to discuss your needs with our specialist consultants who can advise you on the products that suit your specific needs.
• Confirm your credit status and see what you can afford – our consultants will assist you to clarify your credit worthiness and affordability for a new home loan.
• No-obligation proposal – We’ll prepare a no-obligation proposal for you including all the costs, interest rates and mortgage installment for you to evaluate and review.
• Sign the Acceptance – Once you sign your acceptance of the offer, we take care of all the red-tape. You just need to send us some documentation and we take care of the rest.  Your consultant will do all the leg-work and will guide you and manage the process, step-by-step.
• Property Valuation – A Valuator will call at your convenience to value your property.
• Conveyancing – Our national panel of attorneys will prepare all the necessary bond registration documents and will contact you to make an appointment to sign all the documentation.
• Lodgment – Lodging your bond registration is the next step and happens immediately after you sign your papers at the attorney. Re-registration can be effected within 45 days. We’ll keep you posted.
• Registration – Once registered, you can look forward to the ongoing amazing service which our client services team offers you over the life of your bond. If your needs change, your home loan will keep pace with you and your lifestyle.

What documentation is required?

If you are employed, you’ll need to provide us with the following documentation:

• Proof of income: your latest salary advice. If you earn commission or overtime, please provide the latest three salary advices. (For both applicants if applicable)
• Three months personal bank statements. (For both applicants if applicable)
• Copy of your ID document. (For both applicants if applicable)
• Copy of Marriage Certificate or ANC Contract. (If applicable)
• Copy of the Purchase Agreement.

If you are self employed, you’ll need to provide us with the following documentation:

• Proof of income: Letter of Drawings from an Accountant. (For all applicants if applicable)
• Six months personal bank statements. (For all applicants if applicable)
• Six months business account bank statements.
• Last two years’ Financial Statements.
• Copy of your ID document. (For all applicants if applicable)
• Copy of Marriage Certificate or ANC Contract. (If applicable)
• Copy of Registration Documents or Trust Deed. (Whichever is applicable)
• Copy of Purchase Agreement.

How long does approval take?

• Approximately five working days
• Approval in Principle takes two working days
• Valuation takes approximately three working days

By choosing Mortgage Plus for a loan, you will get that continual service to make sure you are getting the best deal possible.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za