Bond Mortgage Glossary

When buying a home, sometimes the jargon can be a little confusing. This list is by no means exhaustive, but it gives a great idea of the kind of terminology that you are likely to come across when you are looking to purchase a home.

Accrued Interest 
Interest earned but not yet paid.

BA Linked Rate
Rate linked to the 3 month BA SAFEX rate which can be monitored on an ongoing basis, and it ensures a three month fixed rate amount. The rate will change every three months in line with the cost of short term funding rates.

Bond Term 
This is the original term of the loan.

Borrower (Mortgagor) 
An individual who applies for and receives funds in the form of a loan and is obliged to repay the loan in full under the terms of the loan.

Capped Rate 
This limits the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan.

Ceiling 
The maximum allowable interest rate of a variable rate mortgage.

Collateral 
Assets a buyer pledges as security for a home loan.

Conveyance 
The document used to effect a transfer, such as a deed, or mortgage

Cooling off period 
This is based on a new law that allows first time home buyers the opportunity to change their minds within five days of signing the offer.This clause is included in an offer to purchase a property under R250 000.

Deposit
The deposit is the part of the purchase price of the property that you pay in cash up front and reduces the amount that you will need to lend. Collateral other than property is also taken into account when calculating your loan to value ratio.

Fixed Rate 
Regardless of whether variable home loan rates fall or rise, the fixed interest rate for the agreed period will continue to apply.

Foreclosure (or Repossession)
Legal process by which a mortgaged property may be sold to pay off a mortgage loan / home loan that is in default.

Freehold 
A homeowner owns the property as well as the land it is built on.

Initiation Fee 
Fee charged by a bank to cover the initial costs of processing a home loan application. The fee may include the cost of obtaining a property appraisal, a credit report, or other closing costs incurred during the process or the fee may be in addition to these charges.

Lien 
A legal claim by one person on the property of another for security for payment of a debt.

Loan-to-Value Ratio (LTV)
This is the percentage the bank is willing to lend you, expressed as a percentage of the bank’s estimated value of the property and the loan amount required.

Mortgage or Bond 
An agreement between you and the bank, stating that the bank will lend you a certain amount of money in the form of a home loan, and that you will pay the bank back over a certain period, on a monthly basis, and at a certain interest rate.

Occupational Rental 
This is paid by the buyer to the seller at an agreed amount, if the buyer decides to move into the property before transfer of ownership takes place.

Offer to Purchase 
This is an offer in writing from the buyer to the seller to purchase. Once signed by all parties, it becomes a legal and binding contract to all parties.

Refinancing 
Paying off one loan with the proceeds from a new loan secured by the same property.

Second Mortgage 
A second mortgage is a secured load that is subordinate to another loan against the same property.

Sectional Title 
This is an entire complex divided into individual units and sold separately.

Title Deed 
A document stating ownership of a property and and details the rights of ownership and possession of the property.

Transfer Fee 
Fee paid to transfer the property from the seller into the name of the buyer.

Underwriting 
In mortgage lending, the process of establishing suitable terms and conditions for the loan and of determining the risks involved.

Usury 
Interest charged in excess of the legal rate.

Variable Rate Loan 
The borrower’s home loan rate will rise or fall according to how interest rates rise or fall.

Voetstoots 
This clause is always found in a sale document and means ‘ let the buyer beware’. All defects must be mentioned to the buyer upfront.

 

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About BetterLife Home Loans

Since 2003 BetterLife Home Loans has been SA’s No.1 Bond Originator, handling the entire home loan application process on your behalf – free of charge! Our aim is still to source the best interest rate for you by submitting your home loan application to all the major banks. There is no easier way to apply for a Bond or Home Loan in South Africa!

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