Borrowing


Questions to ask your Bond Attorney before you sign

1. How much longer will it be to registration?
If you are taking transfer of the property, about four weeks provided there are no complications and you have paid your transfer costs. It depends on when the transferring attorney will be ready. If it is a further loan on a property you already own, registration should take no longer than another two weeks.

2. Do I need to read through all the documentation?
Almost all your bond documents will be standard forms and affidavits for official purposes. Your bank will send you a loan agreement which will contain all the key information you will require. You can rely on the bank’s attorney to guide you through all the documentation, but you do need to acquaint yourself with the documentation, as ignorance of a particular aspect, is no excuse in law.

3. Why does my bond have a cover clause?
All banks add an extra amount of cover to their costs to realise their security, usually 20% of the capital amount loaned to you. It protects the bank against other creditors if you should default.

4. Do I have to sign a debit order? These days most banks make signing of a debit order a condition of their loan grant and therefore you will have to arrange for one. You can usually choose the day each month when the debit is to go through. It’s much easier paying by debit order – and banks know they’ll be paid on time each month.

5. Can my bond costs be deducted from the loan?
Only if you made prior arrangements with your bank to include the costs. If the full amount of your loan has to be guaranteed as part of the purchase price of your property you’ll have to pay the bond costs separately. You will have to pay the bond costs in full before the bond is registered.

6. Do I have to take out the bank’s life assurance?
If ceding a life policy for the value of the loan is a condition of the original grant, then yes, you will have to arrange this. Your bank cannot force you to take out insurance with its own company. If you can, cede one of your existing policies, which your bank will be obliged to accept.

7. When will I have to pay my first instalment?
Usually on the first day of the month following the month of registration. Your bank will be in contact with you as soon as your bond is registered.
When signing your bond documents the bank’s attorney should be able to tell you when the first instalment will be due.

8. Can banks insist on suretyship?
Most definitely, especially if you are signing for a CC, Company or Trust or if you don’t qualify for the loan and another person’s commitment to its repayment is required. If you should default in repaying your loan the bank can act against the surety without suing you first.

9. How does the bank choose the bond attorney?
Each major bank has a panel of attorneys in each town for the registration of its bonds. It will instruct one of them on a random basis. Remember, the attorney represents the bank, not you. If the transferring attorney is on the bank’s panel, the bank will usually instruct that attorney to do the bank’s bond registration as well.

10. Who gets my title deed after registration?
As long as your bond is still operative your bank will hold your title deed as security. Once your bond is cancelled it will release the deed to you. You can sell your property at any time but cannot transfer it unless all existing bonds are cancelled simultaniously.

Are you in a position to ride out unexpected and sudden economic tornadoes? We suggest ways to keep your borrowings sensible and your home safe.

Ever watched a couple of pigeons bobbing around on a busy road? Suddenly a large truck bears down on them and at the last second they scatter in every direction, only to return to the road once the hazard has passed. Danger gone - or has it? It’s only a matter of time till the next heavy vehicle comes along.
The odd remains of a flattened bird testify to their apparent foolhardiness. Birdbrains? Perhaps - but they’re not the only ones who think crises don’t make a habit of returning time and again.
Home Loans - Credit Sources or Debt Traps? On a warm, cloudless summer’s day storms may seem most unlikely but you know how quickly they can rise. The sun is shining fairly gently on the world of home loans at present. Interest rates remain reasonably low and stable. Apart from the series of petrol-price rises there’s little on the horizon to suggest that the weather could change suddenly for the worse. Yet it happened - in 1984 and 1998 - and it could happen again at anytime. Many people still living remember the Wall Street crash of 1929 and the unexpected depression which followed. Keep your borrowings sensible. Flexible bonds can be healthy credit sources - provided your overall balance is low, you have breathing - space in your income to cope with sudden rate increases, and your withdrawals are rea-sonable.

Don’t fall for the temptation on sunny days to dispose of your umbrellas. For many people, now occupying small apartments in run down buildings, their mortgage loans proved to be debt-traps in tough times past. Rather weather the storms before they come. A yacht may look like the most fragile boat on any lake
or sea, standing straight up and liable to be buffeted by any gust of wind. Yet seamen who venture out to sail around the world, anticipating the worst possible storms, always choose yachts as their sailing vessels. The reason? They have keels, they have solid weights just above them, to ensure that the yacht can neither
sink nor be overturned. The vessel will always right itself. The most important factor is that these features are below the waterline. Do you have stabilising factors in your financial portfolios acting as weights below the surface to keep you from falling into irredeemable debt?

Wrong Attitudes That Lead TO Financial Ruin

In the USA people freely use credit cards to service consumable items, like daily grocery purchases. Of course no South African would do such a thing! You wouldn’t - would you? Don’t do it! Don’t use your credit cards or, worse still, your flexible bond to finance purchases you cannot repay out of your monthly
income. A paid-off mortgage can be a healthy overdraft facility if you have the necessary self-discipline
or the ability to repay any amount accessed fairly quickly. Beware, however, of the following pigeon-like attitudes which you may come to regret in tougher times to come:

• Business is bound to pick up shortly Wishful thinking is a poor substitute for sound wisdom. Rather work on the possibility that it may actually deteriorate further.

• Interest rates are sure to fall again soon The media conducts a seesaw projection on rate changes. One week they’re going to fall to stimulate economic growth, the next they’re going to rise because of adverse economic indicators. So it goes on week by week. Wait and see.

• The monthly repayment will be negligible A loan of R10 000 on a flexible bond will only increase your instalment by about R120 per month. It may seem a small layout but you’re not only saddled with a higher monthly repayment but a much larger capital debt that is now much harder to pay off. You may live
to regret your borrowings in difficult times to come, especially if rates rise sharply.

• This is the last time I’ll make a withdrawal That’s what you purposefully told yourself six months ago when you last accessed your home loan. You may be caught in a borrowing spiral which will only end when there’s nothing more to draw and so much more to repay.

• I can always skip the odd instalment Once you skip one, it’ll be so much easier to miss another. Don’t think your bank won’t notice. After three missed payments you’re likely to get a summons for the full outstanding debt. You may be the latest casualty on the South African foreclosure scene.

• One big loan could cover all my debts The temptation will be to borrow more than you really need so that your ultimate debt is greater than it was before. Reducing the number of your creditors may not lighten the load.

• We’re improving the value of our home, after all Adding extensions, making decorative improvements or putting in a swimmingpool may increase the home’s value, but if you’re going to live indefinitely in it, you may only have increased your own indebtedness.
Weigh up the pros and cons first.

What Could Bring On Storms Or Even Hurricanes?

Sudden changes in world economic affairs are quite common and are rarely foreseen. A few years ago many Asian financial markets crashed. Even sound economies like Malaysia’s suffered severely. It was not long before many countries, including South Africa, were hit by the side- effects. Hurricanes pass, but they leave dreadful damage that can take years to repair. Solid foundations and strong building materials
can withstand storms, and you too can ride out the economic tornadoes if you build up some financial reserve to cope with hard times. It’s the Joseph-syndrome, the opposite of pigeon mentality. It’s the wisdom to fill the granaries in the good years before the famines come. Any number of adverse factors could cause interest rates to rise. World recessions are one thing, local factors are another. Trevor Manuel
cannot understand why business confidence remains low in South Africa even though his efforts to stabilise our economy have been remarkably successful. Unfortunately lawless land-grabbing in Zimbabwe coupled with Robert Mugabe’s endless threats and disregard for economic realities and the rule of law don’t help to inspire confidence. This will not change as long as our Government continues to turn a blind eye to his excesses. Low business confidence, massive petrol price increases, a devaluing rend and other similar negative influences can contribute at any time to a local recession. Worldwide interest rates have been rising regularly. The ripple effect could reach our economic shores at any time. Keep your bond debts down, borrow sensibly and conservatively, and pay off as much as you can.

It’s All A Question Of Attitudes

An American writer recently commented that, when it comes to Africa, the West is experiencing compassion fatigue as it receives never-ending appeals from a region where tribalism, dictatorships and power intrigues negate the intended goodwill. Countries like Somalia, Sudan, Liberia and Rwanda “cast a pall of hopelessness over the African continent” he adds. Zimbabwe may soon join that list. We need to correct our own attitudes if we’re to go forward, if the current sunshine is not to steadily give way to a permanent fog of uncertainty. The good times will not last forever. They will certainly be interrupted by economic cyclones, they may yield to long periods of economic drought, and the warning signs
should be heeded now.

Clear your debts if you can. Like Zimbabwe inflation could get out of control in the future, carrying massive rate increases with it. Before you access your loan, ask yourself whether you can really afford it. It’s good to be positive and optimistic - that makes you good company for others. But it’s even better still to be realistic -you’ll enjoy your own company in years to come even though times may become more difficult. How many of Jeremy Maggs’ customers tell him they’ll pay off their debts first if they win big money on his TV show? Dave Paterson did - and the same wisdom took him on to win the big one. He may qualify as the least flamboyant participant ever to sit opposite the great tormentor - but he’s smiling now. You don’t have to win a million to join him.
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