Bonds, Mortgages for South Africa

In many countries, a “bond” is more common terminology for a saving vehicle rather than a product for raising property finance. The term “mortgage” is more common term in Europe.

A bond in South Africa is an amount borrowed against a property, either for the purposes of purchase or raising funds. In return for the bank (or other lending institution) granting a bond, the bond holder (borrower) is required to make a monthly payment of interest and capital. The property is used as collateral by the lender in case of non payment by the bond holder.

Types of Bonds

Bonds can be offered on the following basis:

  • Fixed Rate Bonds – the lender agrees to grant a bond at a set rate for a certain period of time. This option can be useful for clients seeking to know exactly what they have to pay each month with no fluctuations.
  • Variable Rate (Prime) – The lender grants the bond at their normal lending rate. It can increase and decrease as their lending rates alter.
  • Prime Minus – The lender agrees to grant the bond at a discount to their normal lending rate. Incompass Bonds negotiate this on their clients’ behalf.

 

Terms of Bonds

South Africa bonds are normally granted for between 5 and twenty years. It is important that your bond allows flexibility of payments – paying even a little more on your monthly bond can save you thousands of rand and many years of payments.

Different Classification of Bonds

South African lenders tend to classify bonds into three areas:

  • Commercial Bonds – for example the purchase of an office or commercial premises.
  • Residential Bonds – for domestic properties.
  • Semi–Commercial Bonds – this would include property that has a commercial and residential element to it such as a guesthouse.

More information on guesthouse financing is available here

For more information on Property Finance, please use the links below

What are access bonds? – Learn about access bonds and their flexible features.

Taking out a bond when you don’t need to? – Combinations of exchange control, consumer credit regulations and the potential need for flexible, competitive credit lines can mean a bond should be arranged even if not required to finance a property purchase.

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