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Here’s what you need to know before signing a joint bond application

Good partnership.resize

We recently had a case where an aspirational homeowner asked his brother to help him realise his dream of having his own place to call home. Ernest first tried applying on his own in 2008 and did not qualify; with his brother as joint applicant he was able to buy his home. The brothers agreed verbally that Ernest would pay for everything and it would be his home.

Ernest’s brother later got married and then passed away. The home is fully paid off but now Ernest’s sister-in-law is asking for her portion of the house – her husband was a joint owner after all.


Find out what Ernest’s outcome was


While a joint bond application is a good solution to qualify for your dream home, it is important to understand exactly what it is that you are signing up for first.

Dr Simphiwe Madikizela, Head of Special Projects at FNB Housing Finance says a joint application can help increase your chances of qualifying as both parties’ incomes and expenses are taken into account to assess the affordability based on their disposable income. However, warns Madikizela, it is important that you understand exactly what you are signing up for, explaining some of the pros and cons to take note of.

Pros:

  • There is a high likelihood that the bond application will be approved if both individuals have a good credit record.
  • You can afford to buy property that one partner wouldn’t necessarily afford with their salary alone.
  • You could benefit from a good interest rate as affordability assessment is done on both parties.
  • You are only liable for half of the bond payments and legal fees.

Cons:

  • If you are not married, you will share ownership of the property with another individual once paid off.
  • If there is a default, both partners’ credit records are affected.
  • Should one partner want to pull out of the bond agreement, a new bond application will have to be processed and a full credit assessment conducted on the application to verify affordability. In addition, the home loan facility will be closed, which means you will have to pay bond registration fees for the new home loan facility.
  • Upon the approval of the home loan, the bank may require both applicants to have adequate life cover that will be ceded onto the bond.

Madikizela’s final words of wisdom? “Buying a property is a big commitment and the decision to buy with someone else should not be taken lightly. The parties need to work out all the eventualities before taking ownership as shortcomings could potentially set you back financially.”

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ungerermariette@gmail.com

Mariette Steynberg is a qualified economist with a post-graduate diploma in financial planning. She has enjoyed working on holistic financial plans for clients in various stages of life, as well as a development economist assessing the socioeconomic impacts of new developments. When she is not working, Mariette enjoys parenting her quirky, delightful toddler girl. Cloth diapering, Eskimo kisses and the importance of reading to your child are all causes close to her heart. Mariette is passionate about financial education and hopes to use the experience she has gained to share knowledge with HomeTimes’ readership. Her goal is to provide information that is implementable by everyone.

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