Can I get a Second Bond?

If you want to purchase property, whether for a business or home, you do so by taking out a bond. A bond is more commonly referred to as mortgage. It’s rare that an individual will have ample enough funds to purchase a property straight-up. So the individual must borrow from the bank.

Banks want to lend money. In fact, it’s one of their primary ways they stay in business and a founding pillar. Holding bonds allow the bank to make a long-term profit. It also allows the bank to own property until the lender has fully paid off the loan.

The bank holds stipulations for individuals wishing to purchase property. For example, the individual must put down a cash deposit against the purchase of property. Generally the buyer must meet a minimum of 30% of what the property is worth.

The current mortgage crisis has resulted from banks, especially in the United States, becoming too lenient in who they offer mortgages too. In fact, sometimes banks allowed people to take out mortgages with little down. They are now paying the price, and as a result, must only offer new mortgages with a high down payment.

Banks now offer bonds only on strict restrictions, including the minimum 30% equity on the property. The banks do this because they need to assure they will recover the total sum of the bond in case the buyer cannot meet the payments.

After you provide the bank with all the details, they will sit down and study your case. The bank needs to decide if you really need the money and if you will be able to pay it off. It’s difficult paying off one bond much less two.

Banks who issue bonds are entitled to ask for banks statements and details of income. Banks prefer to see bond repayments be no more than one third of the joint net salaries of the buyers. They will never admit this openly, but banks need to have this type of verification.

If you meet the bond’s criteria, have a stable job and ample income, the bond is probably only a signature or two away. Just make sure allow the bank plenty of time to examine the bond request and you think it through intensely.

Graham McKenzie is the content syndication manager at BondCredit.co.za South Africans leading Bond Originator