Don’t sign your rights away

Homebuyers should carefully read the mortgage clause on their offer to purchase or agreement-of-sale documents to make sure they know what they are letting themselves in for.

This advice comes from Martin Schultheiss, CEO of the Harcourts Africa real estate group, who says such clauses may be confusing because different estate agencies word them differently.

“In essence, the mortgage clause stipulates that the purchase agreement is subject to the buyer being granted a home loan within a specified period. However, sometimes the clause states that a home loan will be regarded as having been granted even if approval is only provisional,” he says.

“And in the current climate where bond approval is no certain thing, in spite of banks’ more lenient approach, it is doubly important to carefully note the contents of such clauses.”

He says some mortgage clauses may also provide that buyers are bound to the agreement even if their bond approval includes unacceptable conditions such as the provision of additional security for the loan or the procurement of additional life assurance.

“And the worst case scenario is arguably a situation where this clause is left blank. This could commit the buyer to the sale even if he does not secure a loan - or commit the seller to the transaction without a cut-off date for loan approval, in which case he may be left dangling indefinitely while he waits for the buyer to obtain finance.”

The best way to avoid such potential problems, Schultheiss says, is to deal exclusively with reputable estate agents and to insist that any clause with financial implications is explained to your satisfaction.

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