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How a Further Home Loan, Re-advance or Second Bond Works
When you take out your first home loan to buy a house the transaction is registered in the Deeds Office and a bond in favour of the bank is registered. The word we generally use is a home loan but bond or mortgage refers to the same thing. Your bond will be registered for a specific amount and you are not allowed to exceed that amount in terms of what you owe on your home loan.
Can you apply for a second bond and what is it?
A second bond or Further Loan will be registered over your property when you apply to obtain additional funds over and above the amount of your first bond. You therefore need to have a first mortgage before you can apply for a second mortgage. Every bank or home loan company will have their own requirements for qualifying for a second bond but some basic requirements will apply in all cases:
There must be sufficient equity available in the value of your property to be able to register a second bond. If the current value of your property is R 1 000 000 and you only owe R 200 000 on your existing home loan, you have sufficient equity available. If you owe R 500 000 and your property is valued at R 500 000 you already have a 100% loan and you will not be able to register a further bond. The bank will do a new property valuation to establish the current value of your house.
You must be able to afford the additional home loan repayment on the second bond or Further Loan. As is the case with a first bond, the bank will calculate whether you qualify for a further bond. In terms of the new Credit Act the banks must look at a clients overall indebtedness before granting you any additional credit.
Your existing home loan must be in good standing. Being in arrears or paying late will reflect on your credit record and this will make it very difficult for you of obtain a further bond, even if you qualify in terms of the first two points.
You can use the funds obtained from a further bond to do as you wish, even for personal expenses such as your childrens education or an overseas holiday. You can also use the funds for alterations or additions to your home; this will increase the value of your property and thereby the equity.
When you take out a second bond or Further Loan the bank will combine this with the original home loan so that you only need to make one payment. The costs involved will include an initiation fee, bond registration fee and the monthly home loan administration fee.
The process of registering a second bond should happen faster than when you took out your first bond as there is no transfer taking place, only the registration of the second bond. At the time of applying ask your bank how long they estimate the process will take. In most cases the bank will assist you with bridging finance in the meantime.
Complete the short form, and one of our experienced consultants will contact you to answer all your questions and give you sound advice on your options.