The home buying and financing process

Purchasing a home and registering a home loan can be a stressful and lengthy process. It helps to know the processes and parties involved and the steps required for home loan registration.

Parties involved:

•  Seller
•  Estate Agent
•  Buyer
•  Mortgage Broker
•  Transferring Attorney (appointed by seller to transfer the property to the buyer’s name)
•  Home loan Attorney (appointed by the bank granting the home loan)
•  Cancellation Attorney (appointed by the bank cancelling the home loan of the seller)

A single attorney can perform the bottom three transactions, but often there are at least two different attorneys involved.

1. Initiating the purchase
The buyer and the seller negotiate and sign an Offer to Purchase (OTP). The OTP, or Agreement of Sale, sets out the specific terms of the agreement between the two parties including details such as purchase price, deposit, date of transfer, occupational rental, etc.

2.  Mortgage home loan application
The buyer, usually through the services of a mortgage broker, applies for a home loan with various lenders. There are four basic stages to the home loan application process:

•  Submission – the mortgage broker submits your application to various lenders
•  Approval in Principle – the bank approves the loan subject to a property valuation and sometimes with other conditions attached
•  Valuation – the valuation takes place either physically or through computer aggregates based property description and recent sales in the area
•  Final Approval – the bank officially grants the loan

The application usually takes between three and seven working days.

3.  Home loan Approval
Once all, or some, of the lenders who received the application have approved the loan, the client will choose which lender they wish to do business with. The financing bank will then instruct the relevant Home loan Attorney to proceed with the home loan registration process. This can take up to three days. The mortgage broker will cancel the application at the other lenders.

4. Property Transfer
The seller advises the Transferring Attorney to transfer the property into the buyer’s name. The title deed and cancellation figures are requested from the bank that currently has a home loan over the property (if applicable). A statement of rates and taxes is requested from the local authority.

5. Home loan Attorney contacts Transferring Attorney
The Home loan Attorney advises the Transferring Attorney of the amount available for guarantees and requests the draft deed of transfer and guarantee requirements.

6. Cancellation Attorney
The Cancellation Attorney is requested to cancel the seller’s home loan upon receipt of a guarantee for the amount owing.

7. Transferring Attorney
The transferring Attorney receives the title deed and cancellation figures and sends a copy of the deed of transfer and the guarantee requirements to the Home loan Attorney. The Transferring Attorney requests that the buyer and seller sign the transfer documents. The buyer pays the transfer costs and the Transferring Attorney then pays the rates and taxes and the transfer duty.

8. Home loan Attorney
The Home loan Attorney prepares the home loan documentation and the relevant account. The buyer signs the documents and pays the costs. The Home loan Attorney prepares and issues the necessary guarantees, forwards them to the Transferring Attorney and prepares the home loan documents for lodgement with the Deeds Office.

9. Transferring Attorney
Once the Transferring Attorney has received the guarantees, they are forwarded to the Cancellation Attorney.

10. Cancellation Attorney
The Cancellation Attorney obtains consent for home loan cancellation from the bank which holds the seller’s home loan.

11. Documents prepared for the Deeds Office
After all the documentation has been signed and the costs paid, the transfer, new home loan and home loan cancellation documents are prepared by the respective attorneys for lodgement in the deeds office.

12. Deeds Office
All the documents are lodged in the Deeds Office by arrangement with the attorneys concerned. The Deeds Office takes approximately 2 – 3 weeks to check the documents before they are ready for registration by all the attorneys on the same day.

13. Bank pays out the loan

On the day of registration, the bank pays out the loan in accordance with the guarantees issued.
Allow at least 3 months for the registration and transfer of the home loan.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Offer To Purchase Doesn’t Mean the Deal is Through

An accepted offer does not always mean a confirmed sale because so much can go wrong prior to the sales agreement even reaching the deeds office.

One of the reasons for sales not going through is bond applications being denied. Almost 25% of accepted written offers do not get past the bond application stage. Even when mortgage originators try to get finance through the four major South African banks, bond applications don’t always get approved.

The problem of bonds being denied lies predominantly with lower income earners with up to 50% of sales not going through in these sectors due to poor credit records. The inexperienced buyers and buyers who have moved up from entry level home ownership fall in this category as well.

The real estate industry is experiencing a negative impact due to this problem. South African real estate principals feels that banks should revise their lending and pre-approval processes. They also says he would like to see government and the financial institutions look at a fixed period pre-approval that cannot be withdrawn for a specified period such as being valid for 60 days. Presently it happens that a pre-approval is given one day and the next it is withdrawn. A bond cannot, however, be withdrawn if a bad judgment is given against the purchaser the day after the bond is registered.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za