GUIDE TO MORTGAGE BONDS
creditor who advances money to a debtor usually requires the debtor
to provide some form of security for the repayment of the debt. Two
main forms of security can be distinguished, namely:
Personal security: An individual can bind
himself/herself personally as surety for the repayment of another's
debt in the event of non-payment by the debtor himself. Should the
debtor not pay, the surety will be called upon to pay on behalf of
Real security: A borrower (Mortgagor) can offer his
immovable property to a lender (Mortgagee) as security for the
repayment of a debt. The Mortgagee (normally a bank) will cause a
mortgage bond to be registered over the immovable property as
security for the fulfilment of the Mortgagor's obligations.
WHO IS THE MORTGAGOR AND WHO IS THE
The Mortgagor is the individual, company, close
corporation, partnership or trust who has borrowed money to finance
the purchase of an immovable property and mortgages his/her property
as security for repayment of the loan.
The Mortgagee is the Bank, Financial institution,
employer or individual who lends the money to the Mortgagor and in
whose favour the mortgage bond is registered.
WHAT IS A MORTGAGE BOND?
mortgage bond is based on an agreement in terms of which the
Mortgagor borrows money from the Mortgagee and aggresses to pass a
mortgage bond over a specific immovable property in favour of the
Mortgagee as security to the Mortgagee for the repayment of money.
WHAT PROPERTY IS CAPABLE OF BEING
All immovable property, improved or unimproved, which is
registerable in a Deeds Office can be mortgaged. This includes a
flat as well, if it is held under sectional title and is owned by
WHAT ARE THE CONSEQUENCES OF FAILURE TO
Foreclosure is the term describing the procedure followed in this
event, if the Mortgagor fails to fulfil his/her obligations towards
the Mortgagee, the latter can enforce his/her rights against the
Mortgagor by calling up the bond and obtaining a Court Order which
authorizes a sale in execution after due notice has been given to
the Mortgagor. A Bank therefore cannot immediately cause a property
to be sold in execution merely because a Mortgagor failed to pay an
WHAT IS THE "ADDITIONAL SUM" AS
PRESCRIBED IN THE MORTGAGE BOND?
The mortgage bond secures not only the principal obligation of the
debtor, but also ancillary expenses which the Mortgagor may incur in
respect of the property such as insurance, maintenance expenses, the
legal cost of pursuing the claim and arrear interest. Thus in a
bond document provision is made for an "additional sum" over and
above the amount borrowed, being the amount intended to cover the
aforementioned items in the event of the Mortgagee having to
foreclose on the bond.
A QUICK GUIDE TO THE BOND REGISTRATION
Step 1 - RECEIPT OF INSTRUCTIONS FROM
Receipt of instructions from the Bank to register the bond. Usually
the instructions are received electronically.
Step 2 - PREPARATION OF DOCUMENTS
If a transfer is involved request a flysheet from the transferring
attorney, guarantee requirements and relevant FICA documents from
Obtain a deeds office printout for the property and the client to
check for any interdicts, insolvencies or other caveats that may be
registered against the client or the property.
If a further advance is to be registered, obtain the title deed from
the bank and prepare the bond documents for signature.
Step 3 - SIGNATURE OF DOCUMENTS
On receipt of the flysheet and other documents, prepare the bond
documents for signature.
Contact the client and arrange for signature of the documents and
payment of costs.
Step 4 - GUARANTEES AND FICA
After signature, the bond attorneys will advise the
transferring attorneys that the bond documents have been signed.
Send guarantee, if requested or advice of the amount available under
the bond. Advise of position to lodge upon request or advise the
transferring attorney of what is preventing lodgement.
Step 5 - LODGEMENT OF BOND DOCUMENTS
If a further bond is to be registered, proceed with lodgement. If a
transfer is involved, lodge on request of the transferring attorney.
The deeds take 7-10 days to be examined in the deeds office where
after they come on preparation for registration.
The conveyancer has 6 days in total to register the bond.
If a further bond is to be registered, the bond is handed in for
registration and registered on the following day.
If a transfer is involved then the transfer and bond attorneys
arrange the date of registration.
Step 6 - REGISTRATION
On the day of registration, the bond with the other linked
transactions are registered at the Dees Office. The bond attorney
advises the bank and client of registration and arranges with the
bank to pay the bond proceeds. The transferring attorney presents
the guarantee for payment after registration has taken place.
In the case of a further bond, the bond proceeds are paid in terms
of client's payment instructions.
Step 7 - DELIVERY OF BOND DOCUMENTS
Once the bond has been numbered and micro-filmed, it is delivered to
the bond attorney from the deeds office. This can take up to 3
The bond attorney then obtains the title deed from the transferring
attorney, if applicable, and delivers the title deed, bond and other
security documents to the bank. If no bond is involved, the title
deed is delivered to the purchaser.
There are certain restrictions on non-residents wanting to purchase
property in South Africa. The non-resident may borrow up to a
maximum of 100% of his/her borrowing base. The 'borrowing base of a
non-resident individual is the sum introduced into South Africa to
fund the purchase of a property, i.e. 50% of the purchase price E.g.
"A non-resident wishes to purchase a property in South Africa for
R600,000.00. Provided R300 000.00 is introduced into South Africa
to effect the purchase he/she would be able to apply to the South
African Reserve bank for permission to avail himself of a bond of
In other words banks will lend up to 50% of the purchase price,
subject to their normal terms and conditions, which would include a
valuation of the property.
Technically, if a non-resident has consistently brought funds into
the country over a number of years, he/she may borrow up to a
maximum of 100% of the total funds invested in South Africa
theoretically this could also be more than 50% of the purchase price
of the property.
Such non-resident loans are however subject to foreign exchange
approval from the South African Reserve bank. Financial assistance
is granted in the form of a loan secured by a mortgage bond to be
registered in favour of the bank granting the loan.
Should you require any further assistance, we invite you to contact
any of our conveyances, namely: