Real Estate Investor Magazine South Africa February 2016 | Page 32

FINANCE

Cancelling a Bond
Be aware of the heavy cost involved
BY DREW HOOK

F

airly regularly in the process of awarding
mortgage bonds for home purchases, the
banks will be faced with a situation, in which,
for whatever reason (usually a serious change in the
applicants economic circumstances) the client will
want to cancel the bond granted to him by the bank
The problem with this is that it will end up costing
a fortune because it often means that you would forfeit
your deposit, the commission that would have been
made on the property and any wasted conveyance
costs…all adding to a large whack of cash that you can’t
afford to lose.
The bond application may then approach the bank
with a request to review the application and decline
the loan so that none of these costs will have to be
paid (many property sales contracts make this sale
dependant on the buyer receiving the bond).

The bank is required to assess the
applicant’s financial position when the
applicant applies for the loan, but if the
financial situation changes, the bank is
not obliged to change the loan again.
The bank is required to assess the applicant’s financial
position when the applicant applies for the loan, but if
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FEBRUARY 016 SA Real Estate Investor

the financial situation changes, the bank is not obliged
to change the loan again. The bank may well do this on
its own accord and then withdraw the loan, which is
entitled by law to do at any time.
Even if the bank does decide to take a sympathetic
line and withdraw the bond, if the original sale contract
has been signed and sealed and the previous suspensive
conditions were met, the agent, the conveyance and
possibly even the seller will be in a position to claim for
their time, their cost and their lost income.
The banks are likely of their own accord to review
granted loan applications if considerable time has
lapsed between the loan approval and the registration
bond.
Obviously no bank wants to impose on a buyer a
bond, which he is likely to default, and in general they
will therefore adopt a sympathetic attitude. However
the public has to realise that between the times they
sign the application and the bond is awarded, it is
absolutely essential not to enter into any other credit or
pay-out arrangements which will adversely affect their
financial situation.
All banks reserve the right to withdraw from the
bond prior to registration. They may be able to do this,
but they will never formally ‘decline’ a bond once it has
been granted.

RESOURCES
Rawson Property
www.reimag.co.za