The Bond Financing Process

August 26, 2007

Day 1: Submit an application through your bond broker

  • Bond Broker pre-qualifies client for loan.
  • Request and motivate for rate discounts for clients from various financial institutions.
  • Contacts client with results and client makes a preliminary decision on lender of choice.
  • Bond Broker submit fully completed application with supporting documents to financial institution.
  • Bond Broker awaits AIP (approval in principle) or decline notification from financial institution.
  • Approval in Principle – Client is approved subject property valuation.
  • Decline – Clients application declined due to various factors.

Day 2-5: AIP (approval in principle) issued

  • Credit department verifies information and does credit checks.
  • Bond Broker receives AIP or decline notification.
  • AIP (approval in principle) – client is approved subject to a valuation to be done on property. This is not a final approval.
  • Decline – Client’s application declined due to a variety of reasons. Bond Broker will reassess application for further assistance.
  • Bond Broker informs client of decision.

Day 7-8: Formal Quotation

  • A property assessment (valuation) is completed by the bank – the valuation takes place either physically or through a so-called desktop valuation.
  • The bank will send a formal QUOTATION (final approval) through to the Bond Broker, the estate agent and the client.
  • The Bond Broker informs client and explains all the details of the quotation. The client then accepts or rejects the quotation.
  • The bank will forward the loan agreement to the attorneys and instruct the Registering attorney to attend to the registration of the bond.

Day 10-12: At the attorneys

  • The home loan bond documents are prepared.
  • Client contacted by attorneys to come and sign documents.
  • Required to pay transfer duty and other costs.
  • Attorney lodges transaction with Deeds Office.
  • Registration attorney confirms registration to buyer and to the bank.
  • Seller’s bond cancelled (if applicable) and settled.

Day 15-18 : At the bank

  • The attorney will advise bank of registration.
  • The bank will disburse the money.
  • The transferring attorney will advise client that the property has been registered in their name.
  • Bank will confirm monthly installment due in writing.
  • First monthly installment due within 30 days of registration date.
  • The Title Deed & home loan document sent from the attorney to the bank for safekeeping.
  • With the new National Credit Act this process can take up to 3 months and longer. See factors that delay registration.

The legal stuff

Phase 1 : The Transfer Attorney

  • The seller informs the Transferring Attorney to attend to the transfer of ownership of the property into the buyer’s name.
  • The transferring attorney will request the title deed and cancellation figures from the seller’s existing bank (if applicable).
  • A Rates Clearance Certificate will be requested from the local authority. No transfer is possible without such a certificate.=

Phase 2 : The Bond Attorney

  • When the bank approves the buyer’s loan and instruction will be issued to the Bond Attorney to attend to the registration of the bond.
  • The Bond attorney informs the Transfer Attorney of the amount available for guarantees and requests the draft Deed of Transfer.
  • This Deed of Transfer is necessary to get details about the purchase price, title conditions etc.

Phase 3 : The Cancellation Attorney

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

Phase 4 : The Transfer Attorney

  • The Transfer Attorney receives the Title Deed and cancellation figures and sends a copy of the deed of transfer and the guarantee requirements to the Bond Attorney.
  • The Transfer Attorney will contact the buyer and seller to sign the transfer documents.
  • The buyer pays the transfer costs and the Transfer Attorney then pays the rates and taxes and the transfer duty.

Phase 5 : The Bond Attorney

  • The Bond Attorney prepares the home loan documents. The buyer signs the relevant documentation and pays the bond registration costs.
  • The Bond Attorney then issues the necessary guarantees and forwards them to the Transfer Attorney who prepares the mortgage bond documents for lodgment with the Deeds Office.

Phase 6 : The Transfer Attorney

  • Once the Transfer Attorney has received the guarantees, he will forward it to the Cancellation Attorney, who (cancellation attorney) in turn obtains consent from the seller’s bank for home loan cancellation.
  • Once all the documentation has been signed and the all the costs involved settled then the process can be finalized.
  • The Transfer Attorney contacts the Bond and Cancellation Attorney to lodge all documents simultaneously with the Deeds Office.
  • The documents includes the: home loan cancellation, transfer and new home loan documents.
  • The transfer Attorney attends to the registration of transfer of the property while the Cancellation Attorney attends to the cancellation of the existing bond of the seller and the Bond Attorney on the other hand sees to the registration of the new bond.

Phase 7 : The Deeds Office

  • The set of three registrations which has been submitted simultaneously and after being examined by the examiners in the Deeds Office, placed on preparation where the attorneys attend to any notes made by the examiners in respect of the documents.
  • This takes 10-14 working days.
  • On the day of registration the bank pays out the loan according to the guarantees issued.
  • Agent’s commission is paid to the estate agent.
  • The Transfer Attorney then forwards the Title Deed to the Bond Attorney/Bond holder who retains the same together with the registered bond document as secured.

LEGAL COSTS

You will be liable for the following costs:

  • A bank valuation and initiation fee.
  • Transfer costs (transfer duty, conveyance fees and stamp duty etc. to the transferring attorney for transferring the property into your name.
  • Bond registration fees which you must pay to the attorney registering your bond

Save on Legal Fees

For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za

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    The 12 Most Common Mistakes New Home Buyers Make (part three)

    August 21, 2007

    On to the final part of this three part blog entry…

    8. Not Negotiating Hard Enough on Price

    Obviously your ability to negotiate the best price on a property will vary depending on your current market’s conditions. A buyer’s market means that there is more supply than demand and therefore buyers have the upper hand. A seller’s market is just the reverse.

    Regardless of the market, however, you can usually negotiate a better price if you will follow the steps previously stated. These steps will give you the information and positioning necessary to approach the negotiation process fully prepared. You should also be careful when offering a certain price and terms for the property not to give any indication that you will go higher. This is the time when a poker face is extremely useful and keeping your excitement in check is critical. Just remember that every rand you save on price will save you 2 ½ to 3 times that amount in mortgage payments.

    9. Not Negotiating For Extras

    This is another opportunity that is often lost during the negotiation process. That is the opportunity to save money on items you will need to buy if you don’t have them (such as a refrigerator, lawn mower, etc.) or to get goodies you would not normally buy (such as a hot tub or sauna). Many of these items can be had simply for the asking.

    Many home sellers don’t want to take the time and effort to have to move the larger items and often they are looking for an excuse to buy something new. Whether they are or not, it can’t hurt to ask. These types of items make good bargaining chips and the worst they can do is say no.

    10. Not Following Up On Contract Stipulations

    When negotiating the purchase of a property there will often be items (such as repairs, etc.) that the seller agrees to take care of prior to closing. It is a mistake to simply assume these have been taken care of and not check on them prior to closing.

    Make sure to do a final walk-through of the property well before the closing date. Bring along a list of all the items that were agreed to and check them off as you go. It’s not a bad idea during the negotiation process to agree to an amount to be held in escrow at closing if the items are not taken care of. This will give the Seller motivation to make sure they are completed and will avoid delays in closing if they are not.

    11. Hidden Expenses

    It’s no fun to get to the closing table and find out that the costs of completing the transaction are higher then you thought. If inspectors, surveyors, etc. have agreed to be paid at closing make sure you know what their charges will be and get it in writing. The same is true of your lender. Your lender should be able to provide a detailed estimate in writing of all expenses to expect in originating your new loan. Be sure and bring these items to closing and compare them. No lender can be exact down to the penny in estimating these costs but a good lender should be pretty close.

    12. Rushing The Closing or The Escrow Period

    Nobody likes surprises when it comes time to close. Moving is one of the most stressful times in peoples lives so both the Seller and you as the Buyer are going to be more emotionally “uptight” then normal. The best way to minimize the stress is to expect some bumps along the way and give yourself time to deal with these challenges as they appear. Make sure to set reasonable time frames for items to be accomplished then hold to your schedule as much as possible. Ask your lender to have all the documents available for review a day prior to closing. Check them out carefully to make sure the costs on the settlement statement are in line with what you expected and that the terms of the loan (i.e. interest rate, fixed or variable, term, prepayment penalties, etc.) are what you agreed to. This way if you do find a discrepancy you will be able to deal with it without feeling under the gun and there will be time to fix it before it becomes a problem.

    So, what to do next?

    Well, I know that is a lot for you to take in so I am happy to spend some time with you and answer any questions you have about the process of buying your new home. You are welcome to call my office at 086 110 6204 during business hours. Or visit this website for more information

    Or, of course, you can do nothing, throw this letter away and continue paying rent wondering what it would be like to own the house you’ve always wanted and watching the price of homes continue to rise. Instead, if it’s time to make a change in your life, let me help you avoid the possible pitfalls and make smooth transition into your new home.


    The 12 Most Common Mistakes New Home Buyers Make (part two)

    August 14, 2007

    4. Taking Your Credit For Granted

    Unfortunately you may be reading this report too late to have kept from making this mistake but it is never too late to start improving your credit rating. In the last few years the way lending decisions are made has become much more automated. And the way the decisions are made has changed dramatically. For the most part decisions are made based on certain guidelines and not left up to subjective humans.

    This places more and more importance on your credit rating when applying for a loan. How good your credit rating or “scores” are depends on several factors such as: Current credit balances, Amount of current available credit, Late payments (How many, How late, How recent, Type of Account) and recent inquiries about your credit.If you are planning on getting a mortgage loan make sure you are making all of your current payments on time and avoid any unnecessary inquiries into your credit. In other words, don’t go out shopping for a car or new furniture and have sales people all over town running credit checks on you. If you want to have the highest scores possible and therefore qualify for the best rates available it is best to be patient and wait until your loan is done before you go do things that will affect your scores.

    5. Not Having a Prioritized List of What Is Important

    Many new home buyers will often get swept up in the excitement of becoming homeowners then after it’s too late they find out that the home they just purchased does not suit their needs. Before even beginning the process clearly define your wants and needs. Put the list in writing and prioritize it in order of importance. Measure each property you look at to determine how well it matches your list.

    Here is a list of some items to take into consideration:

    Size of home: Number of Bedrooms, Baths, Etc.

    Style: Are stairs or a basement ok? Etc.

    Type: Single Family, Duplex

    Condition: Does is have to be near perfect or are you willing to do some repairs in order to get a better price?

    Location: Type of neighborhood, Proximity to work, schools, etc.

    Special Features: Garage, Wheelchair access, Air Conditioning, Etc.

    6. Not Checking on Title and Boundary Issues

    It’s no fun to get to closing and find out that there is a problem with the Title to the property. These problems could appear in the form of undisclosed owners, tax liens, mechanics liens, easements, leases or other encumbrances. One of the first things that should be done as soon as you come to an agreement on the purchase of a property is to order a preliminary title report from a title company. Your real estate will normally handle this. Make sure you receive a copy and review it.

    If there are any parts of the report that you don’t understand, ask your agent or an employee of the title company to explain. If there are issues that need to be taken care of make sure that they are completed before closing and that the Title Company is issuing you a clean policy of Title Insurance. This Title Insurance Policy will help protect you from claims that may come along after the fact.It’s even worse when you find out about a problem after closing such as a problem with your property boundaries. For instance, if your neighbor discovers that the shed at the back of your property is sitting partially on their property it’s your problem regardless of whether the shed was built there by you or a previous owner. Survey’s help you avoid these types of problems.

    The dependence on survey’s varies from area to area depending on how established the neighborhoods and boundary lines are and the type of legal descriptions that are used. Your agent can give you a good idea of the necessity of a survey or an update of a previous survey. However, if there is any question as to the boundary lines of a property your offer should be made subject to your approval of a survey by a licensed company.

    7. Not Getting a Thorough Inspection

    Another valuable tool for avoiding unexpected problems is a professional inspection done by a licensed home inspection company.

    Your offer should also be subject to your approval of just such an inspection. A professional inspector will objectively inspect the home inside and out and should be able to give you a report of any item that needs to be fixed with associated, approximate cost.

    No home (even a fairly new home) is perfect. You should not be alarmed when the inspector suggests minor repairs or maintenance issues. This is quite normal. Avoiding the large repairs or expenses (such as termites, radon, mold, lead paint or asbestos) is when the inspection will more than pay for itself.

    The final installment will reveal the last of the common mistakes.


    The 12 Most Common Mistakes New Home Buyers Make (part one)

    August 6, 2007

    …..and how to avoid them

    “It’s much easier to cross a mine field when you know where
    the mines are. By knowing the common mistakes that most
    people make when buying a home you can save yourself time,
    money and a great deal of frustration.”

    For most people buying a home is the largest investment they
    will ever make. Unfortunately many homebuyers go into the
    process without learning about the process. This often leads
    the purchase being more expensive and more difficult than it
    needs to be. By learning from other people’s experience you
    can avoid…

    • paying too much for the home you want, or

    • losing the opportunity to own your dream home or,

    • buying a home with lots of problems or,

    • (worse) buying the wrong home .

    A systematic approach to the home-buying process can help you steer clear of these common mistakes, allowing you to not only cut costs and save time, but also make the process a more pleasant experience.

    12 Home Buyer Mistakes

    This important report discusses the 12 most common and costly. Home buyer mistakes and what you can do to avoid them:

    1. Not Checking Out Each Area Thoroughly

    If you are planning on buying a house in an area that you have lived in for a long time this may not be an issue. But if you are new to the area it will be well worth your while to ask people you trust about the different areas you are interested in. When you narrow it down to two or three choices, walk the neighborhoods, talk with people you meet, visit community organizations, schools, places of worship, etc. and make sure this is area you will be comfortable in.

    2. Not Verifying Value’s

    What price should you offer when you make an offer on a home? Is the seller asking too much or is this a bargain you should jump on? You will never know for sure until you research the market and look at what comparable homes have recently sold for in that particular neighborhood. This is something your real estate agent can help with. By accessing the local multiple listing service an agent can provide a list of all the homes that have sold in a prescribed area. Ask your agent to provide a list of all the homes that have sold within the last three to six months that are the same type of home that you are interested in and close to the same size and age (or at least condition) along with the final selling price of the property (including any known seller concessions).

    If you will take the time to drive by these properties you will quickly get a feel for values in the area and be better equipped to make a reasonable offer for the property. If you don’t have a real estate agent we would be happy to refer you to one.

    Mortgage Marketing Secrets

    3. Not Getting Pre-Approved For a Loan First

    This is where most people get the cart before the horse. They get excited about buying a home and start looking around. Before you know it they have hooked up with a real estate agent and are considering different properties. Then they finally ask the question:

    Can we afford this? Unfortunately the answer is often no and they have to start all over again. And, of course, when they start looking at lower priced homes their enthusiasm is dampened because they hadtheir hearts set on the nicer homes. Getting pre-approval not only helps you know what you can afford but it puts you in a stronger negotiating position as well. When the seller and their agent know that your loan is done and just waiting for you to find a property they will be much more interested in your offer and will give your offer more weight against competing offers.

    Getting pre-approved is fast, easy and normally free. Most mortgage professionals can obtain written pre-approval for you at no cost and no obligation, and it can all be done quite easily over-the-phone. More than just a verbal approval from your lending institution, a written pre-approval is as good as money in the bank. It entails a completed credit application, and a certificate from the lender which guarantees you a mortgage up to a specific level when you find the home you’re looking for. Make sure you are dealing with a professional who specializes in residential mortgages. The mortgage industry is extremely complicated with literally hundreds of options and choices.

    Using an expert can make the difference between getting into the home of your choice or having to rent forever.


    7 Questions You Must Ask When Applying for a Home Loan

    July 13, 2007
  • What is the interest rate on this mortgage?
    Be sure to ask for the annual percentage rate (APR) of the loan’s interest. The APR is usually higher than the originally quoted rate because of the additional fees involved in procuring a loan. You must beware of APR found in advertisements. Often these are used in bait and switch schemes to get customers in the door. Always ask for an itemized list of rates and fees.
  • What rewards will I get?
    Often lenders have reward schemes. Link your home loan to a Voyager or e-Bucks account. Get info on your lenders rewards schemes and make use of them.
  • What are the fees, if any, involved in locking in an interest rate?
    Interest rates are constantly fluctuating and it is possible that it could change between the time you apply for a loan and the time you close. Often you can “lock in a rate” that will keep your interest rate the same from the day you apply. Please make sure that you find out if there are any fees involved with this.
  • Is there a prepayment penalty on this loan?
    Prepayment penalties may be added to lower the loan’s interest rate. There are many types of prepayment penalties that can be added to a loan. Make sure that if your loan has a prepayment penalty, you are aware of the terms and conditions.
  • What documents will I need to have?
    This will depend on the type of loan you choose. Most loan applications will require full documentation of income, assets, debt payments, etc… If you apply for a building loan additional documents will be have to be submitted (building plans etc). A loan application in a companies name will require further financial statements, etc.
  • How long does it take to process a loan?
    It can take as little as two weeks, to as long as 60 days or more. Be sure to have the lender give you the most accurate timetable possible so you can determine how far out you need to lock your interest rate.
  • What might delay approval of my loan?
    If you provide complete and accurate information to the lender, the process usually runs smoothly. Be sure to tell your lender immediately of any changes to your income or any new debt or marital status while your loan is processing. There could be delays your lender discovers any undisclosed credit problems so be sure to be as accurate as you can.For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za

  • How To Afford A Mortgage

    July 10, 2007

    Minimum Cash Requirement

    Many times a 5-10 percent cushion is built into the sales price of a home to allow negotiation of a sales offer. Just remember that in a hot real estate market, the seller may not be anxious to accept a low offer and may reject the agreement on a home that you really want due to small differences. If you play the game, you must be prepared to lose and go on to the next property.

    You should try to get pre-qualified by a lender prior to shopping for a home. A pre-qualification is a strong marketing tool when making an offer that may contain many a number of seller concessions. Telling a seller that you are already pre-qualified for a loan makes the acceptance of a low offer much more palatable.

    How to Maximize Your Income

    Most lenders will require that you disclose your income from the previous few months and use this income to qualify you for a mortgage. They will ask for tax returns, or bank statements to verify the income. The lender will then apply a formula to the income to determine your ability to repay the loan. A common requirement is that the mortgage payment cannot be greater than 30 percent of the borrower’s gross monthly income.

    One way to expand your purchasing power is to obtain a low, low interest rate mortgage such as a variable rate mortgage. They may offer up to a rate of 2.5% percent under the going rates. The disadvantage to these types of loans is that the rates are subject to change as frequently as every few months. If your interest rate is linked to the JIBAR rate it will be subject to more regular changes. This type of loan can however add thousands to your purchasing power due to the low initial rate.

    If you don’t have the stomach for a variable rate mortgage, explore fixed rate type loans. The rate will stay the same over a certain period, after which you can renegotiate with your lender. The only negative is that if interest rates are going down, that you will increase your borrowing cost.

    Finding a Bargain Home

    One of the clichés of the real estate world is the most important thing to consider when buying a home is “location, location, location.” That also applies when trying to find a bargain in a home. Generally it is better to buy a “fixer-upper” in a terrific neighborhood rather than a great but bargain-priced home in a less desirable neighborhood. There are always bargains in run down areas, but while these houses may offer a lot of house for the rand, they will be difficult to sell and may have little or no appreciation despite the time, energy, and money you have poured into them.

    Forget about buying a home from the newspaper auction notices, they are difficult to purchase and better left to the pros. Instead foster a relationship with a real estate agent and remain loyal to that agent. You want to find a home that may need some cosmetic work but is basically sound. Estate sales are probably the best area you want to explore, and try to investigate listings that have been on the market for awhile. Keep in mind that the reason a property has been on the market for a long time is because it is less desirable for some reason. Remember, most every property has its price and will ultimately sell when the price/value ratio becomes attractive.

    If financially able, look to buy a home during periods of high interest rates or economic recession. During those times home prices may drop or the seller will be more amenable to accepting low offers. High interest rate periods don’t last forever, and when rates come down or the economy improves you can refinance for a lower rate and even take out some excess cash from appreciation.

    Credit Scores and Below Prime Loans

    Prior to the early 2000s home buyers had to have a very good credit history to qualify for a loan. Those who had auctioned off properties, repossessions, or bankruptcies in their history were told to wait seven years and to walk the straight and narrow credit path in the meantime. The good news, however, is that now many more people are eligible to obtain a mortgage albeit at a higher than the prevailing rate.

    During the 2000s credit scoring also came into effect. Credit scores attempt to classify a person’s credit history into one three-digit number ranging from 300 to 900. A credit score of 650 or above is deemed to be a “good” credit risk by many lenders, the higher the better. In fact, a credit score of 700 or above can allow for a 100 percent LTV loan at only a little higher interest rate. A score of 625 may be acceptable, but scores from 525 to 625 usually fit into the sub-prime loan category. A score under 500 makes it very difficult or impossible to obtain financing of any sort.

    Hidden Costs in a Mortgage

    Most every loan is going to have associated with it fees for insurance, valuation, etc. Most of these fees are commonly required amongst all lenders and they must give you a list of their costs associated with a mortgage. Despite the fact that the costs are disclosed, some lenders may include extraordinary “junk” fees in their costs that an unwary buyer may not recognize as an extra fee. At the time of a loan application lenders are required to give you a written closing cost estimate.

    First, determine if you’re rate are being loaded. Some lenders advertise artificially low rates to attract customers but load up on fees to compensate for a lower rate. A tip off to a lender that charges hidden fees would be a lender who advertises interest rates that are appreciably lower than the competition. Interest rates are very competitive and shopping for the very best rate may in fact work to your disadvantage. Differences in rates of 1/8th or 1/4th of a percent result in very little difference in a payment and may be offset by poor service and added hidden fees.

    Mortgage companies and fees. Mortgage companies often advertise that through their intervention the financial institution will subsidize the client’s bond registration fees. But, at what cost to the client? Saving R2 000 for example in bond registration fees, but ending up paying R200 000 more in interest is a great deal for the bank, but not for the client.

    Mortgage companies are often owned by a bank or an estate agency. The real issue is a serious lack of independence and conflict of interest. Clients have no guarantee that their mortgage application will be channeled to the lender that offers the best interest rate instead of to the one offering the broker the highest commission. These fees will be subsidized by the banks customers in the form of higher charges and higher interest rates.

    Always work with an mortgage firm that is independent from any bank and who’s services are FREE and without any premiums attached to the client.

    Correcting Past Credit Problems

    Contrary to what you may have heard, credit reports are for the most part accurate. Common last names and a “Jnr.” in the family does cause a few problems but credit reports identify people by their identity number, address, and name. If you have an issue with your credit report, credit-reporting agencies are required to attempt to resolve the problem. Most of the information has to be provided by the individual and they should stay in touch for as long as it takes, frustrating or not. There are two main credit repositories in South Africa: Trans Union, and Experian. These companies each hold a database of information and provide it to a more local credit-reporting agency that may actually be issuing the report. If you have a dispute, you can go direct to the two repositories to attempt to clear the issue. Their addresses are listed below.

    As mentioned before, credit scores in the 500 range can cause problems when attempting to obtain new credit. You can raise your score if the original information was incorrect, or you can over time improve your payment history, but it may take a few years of diligent pay history to appreciably raise your credit score.

    If worse comes to worse declaring bankruptcy may be your only answer, but despite its growing popularity, I recommend it only as a very last resort. A bankruptcy will stay on your record for years and make obtaining credit difficult. There are two methods to declare bankruptcy: Voluntary and Compulsory Insolvency (bankruptcy). If your creditors have you sequestrated, this is known as compulsory sequestration. If, however, you decide to have yourself declared insolvent, such act is referred to as voluntary sequestration.

    Should you not have yourself declared insolvent, but wait for your creditors to take the necessary action, there is a possibility that they will not succeed in their application for a court order. It may no longer be in their interest, on account of the fact that your assets are worth too little to them.

    In the absence of compulsory sequestration, your debt simply increases further (as a result of interest), and your financial suffering is aggravated and endures for longer. The descriptions above are overly simple and general, but the bankruptcy option is a poor one and you should explore your options with an attorney before making a decision. After a period of time a rehabilitated insolvent may apply for credit, but this will depend on numerous factors. Most lenders state that at least a year must pass after a person’s been rehabilitated and a new good credit history must be established. A difficult chore, but it can be done. Make sure that rent or mortgage payments have no late payments for at least the previous 12 months. Avoid paying in cash; make all payments by check or credit card where your payment history can later be verified. It will also help to explain to your lender that the situation that originally caused the problem, a job loss, illness, etc., has now been resolved.

    For more information on debt consolidation, bonds and other related articles go to www.globalproperty.co.za