Extending your bond

A bond or home loan is often a necessity when buying a property and many consider the primary aim to be paying this loan off, but there are a number of alternatives that could come in handy.

The ins and outs of subject to bond approval clauses

Why keep your bond account open?

The thought of paying off a home loan and then cancelling this account may well seem appealing at first, but taking a step back to look at the bigger picture, a number of benefits of keeping this account open become clear.

Fundamentally, a home loan secured by a registered bond provides access to funds. This can be particularly useful should it be needed, whether for the purchase of an additional property, for renovations or alterations to an existing property, or for a number of other reasons.

As such, before cancelling a home loan, it is worth considering whether easy access to finance is likely to be useful.

Bond extension options

There are several options that would provide additional funds when needed, each of which has slightly different implications regarding process and costs. These options include:

  • A re-advance of a bond which allows access to the difference between the original loan amount and the amount still outstanding on the bond. Because there is no change in the total loan amount, a re-advance would not need to be re-registered in the Deeds Office.
  • Should a future access advance be approved, a loan for an amount greater than required will be registered and the remainder of the loan will then be accessible in the near future. Similar to the re-advance, this loan does not need to be re-registered with the Deeds Office, but there will be bond costs involved.
  • A further building loan is available when the value of the property built is in the process of being increased by extending renovating or improving the property.
  • In some cases, a bond can moved from one financial institution to another which offers a higher loan amount – this is termed switch bond future use. In order to complete this process, both cancellation and bond costs will be payable.
  • A further bond is an additional bond that is registered over the existing property that one owns. This bond option would involve additional bond costs as this is a new loan that needs to be registered.

It is worth noting that all the above mentioned bond options require an application to made to the relevant financial institution, and are subject to a credit assessment and valuation of the property put up as collateral. In addition, there may be restructuring costs associated with these bond options, and these should be investigated through the relevant financial institution. The type products provided by the various financial institution may also differ substantially.  

Follow Snymans on Facebook for more legal advice, information and news about property.

Recommended for you

Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

Do you need a gas compliance certificate?[post_view before=""]

If you’re selling a property with a gas installation, a certificate of conformity will need to be obtained before transfer of the property. This certificate is issued in terms of Regulation 17(3) of the Pressure Equipment Regulations and has to be issued by an authorised person.

Read More
Buying tenanted properties - don’t get caught out
Contractual Matters

Electronic signatures in South Africa[post_view before=""]

There’s an ongoing discussion in the commercial world, especially in property law, around the types of documentation that can be signed electronically.

Read More
Curatorship - what does it mean to be put under curatorship?
Contractual Matters

A closer look at bank assisted sales[post_view before=""]

A bank assisted sale (or distressed sale) is the sale of the owner’s property with the assistance of the bond holder (the bank). Contrary to popular belief, the bank doesn’t sell the property but rather assists the owner with the sale in order to limit damages for all relevant parties.

Read More
Minors and immovable property
Contractual Matters

What does the Coronavirus lockdown mean for your Offer to Purchase?[post_view before=""]

We are experiencing unchartered territory with the current lockdown due to the Coronavirus and while it is impossible to predict what the future holds or have immediate answers to what this might mean for each property related scenario, we can offer some advice to those who have signed an Offer to Purchase prior to or during the lockdown in South Africa.

Read More
Your Trusted Partner in Residential and Commercial Property Transfers
Contractual Matters

Rectifying information on a title deed[post_view before=""]

A title deed is the formal record of who the current owner is of a specific piece of land so naturally, making sure that this information is accurate and up to date is incredibly important.

Read More

Need more Snymans content?

Sign up for our monthly newsletter.

Extending your bond

A bond or home loan is often a necessity when buying a property and many consider the primary aim to be paying this loan off, but there are a number of alternatives that could come in handy.

The ins and outs of subject to bond approval clauses

Why keep your bond account open?

The thought of paying off a home loan and then cancelling this account may well seem appealing at first, but taking a step back to look at the bigger picture, a number of benefits of keeping this account open become clear.

Fundamentally, a home loan secured by a registered bond provides access to funds. This can be particularly useful should it be needed, whether for the purchase of an additional property, for renovations or alterations to an existing property, or for a number of other reasons.

As such, before cancelling a home loan, it is worth considering whether easy access to finance is likely to be useful.

Bond extension options

There are several options that would provide additional funds when needed, each of which has slightly different implications regarding process and costs. These options include:

  • A re-advance of a bond which allows access to the difference between the original loan amount and the amount still outstanding on the bond. Because there is no change in the total loan amount, a re-advance would not need to be re-registered in the Deeds Office.
  • Should a future access advance be approved, a loan for an amount greater than required will be registered and the remainder of the loan will then be accessible in the near future. Similar to the re-advance, this loan does not need to be re-registered with the Deeds Office, but there will be bond costs involved.
  • A further building loan is available when the value of the property built is in the process of being increased by extending renovating or improving the property.
  • In some cases, a bond can moved from one financial institution to another which offers a higher loan amount – this is termed switch bond future use. In order to complete this process, both cancellation and bond costs will be payable.
  • A further bond is an additional bond that is registered over the existing property that one owns. This bond option would involve additional bond costs as this is a new loan that needs to be registered.

It is worth noting that all the above mentioned bond options require an application to made to the relevant financial institution, and are subject to a credit assessment and valuation of the property put up as collateral. In addition, there may be restructuring costs associated with these bond options, and these should be investigated through the relevant financial institution. The type products provided by the various financial institution may also differ substantially.  

Follow Snymans on Facebook for more legal advice, information and news about property.