HOME LOANS

Buying your first (or second or third!) property is a daunting task – and that’s before you’ve read the contracts! From bond origination to OTP-what-now, the property market is packed with jargon that almost seems designed to make you feel like a noob.

But get ready to drop a total knowledge bomb at your next viewing. Below, we’ve covered every property term a homebuyer needs to know, from A to Z.

A is for…

Access bond

Extra money in = potential money out. An access bond is a type of home loan where, if you pay in a little more than your minimum repayment every month, you can draw this extra money out if you need it. A savings-meets-personal-loan facility, as it were. Great for when you decide to do that bathroom reno.

Accrued Interest

Not making your full monthly repayments? Accrued interest is the accumulated interest on your home loan that has not been paid yet.

Administration fee

One of those wonderful extra costs involved in a loan application, courtesy of the lender, because they’re doing all the admin around the home loan. Bit of a grudge payment, this one, but better them than you, right?

Affordability

Can you put your money where your mouth is? The home loan lender will assess your affordability – that is, whether or not you can actually make your monthly repayments. They’ll look at your credit score and do a deep dive into your finances: your income, your expenses, your debt and the size of your deposit. They’ll use that data to assess whether you’re able to cover the costs before they grant your home loan.

Asking price

The cash-monies that the seller is asking for. Almost always negotiable.

B is for…

Bearer

The bearer in your contracts is the person who holds the asset (in this instance, the person selling the property).

Bona fide

A bona fide loan is a loan that has been granted in good faith with no deceit or fraud.

Bond costs

All the additional costs related to a bond: these include postage, petties, electronic instruction and generation fees, and Deeds Office searches. Top tip: you need to pay these fees (and more: see bond registration fee, transfer duty, administration fee…) upfront. Keep them in mind when calculating what you can afford.

Bond registration fee

A cash amount paid to the attorneys to register the bond. On a R1 million bond, you’re looking at around R30k. (Our partners over at BetterBond have a handy bond and transfer cost calculator you can use to work out these costs.)

Bond term

The length of time you have to pay off your bond; normally either 20 or 30 years.

Building loan

Money used to finance the construction of a house on vacant land, or to renovate an existing home. A building loan includes the cost of the stand or property. Payments are made directly to the builder as each stage of the build is completed. (And yes, you could take out a personal loan for a renovation but take heed: the interest rate will be much higher. Building loans use your property as collateral, which brings down the interest rate.)

Buyer's market

Where you want to be! This market is favourable to buyers, which means you could negotiate a lower price for your dream home. A buyer’s market may also mean lower interest rates on your loan, or a lot of sellers in an area.

C is for…

Capped rate

The interest rate on your loan has a maximum limit, regardless of market fluctuations. Also known as an interest rate ceiling.

Collateral

The asset you put up to secure the loan. In this case? The property.

Commission

Commission is what the estate agent will earn by making it rain and finding the seller a buyer (that’s you). In South Africa, it’s usually around 8.25% but this is usually negotiable.

Conveyance

The legal act of transferring a property from one name into another.

Cooling-off period

A short period of time after you sign an offer to purchase (OTP) in which you may choose to cancel the purchase. Be warned though: backing out of an OTP can be immensely tricky, even during this window, and could result in a lot of legal headaches. Rather don’t sign one until you’re absolutely sure.

Credit bureau

Credit bureaus collect credit information to determine your eligibility for a loan. They know about every maxed-out store card and overdue cellphone bill. The credit bureaus share this information with the lender (see credit report and credit score, below), so the lender can get an idea of whether or not it’s a good idea to offer you a loan.

Credit report

A report of your credit history – and an assessment of your eligibility for a loan. You can get a free personal credit report once a year from reputable credit bureaus like ClearScore, TransUnion or Experian, so that you can see what your potential lenders will see.

Credit score

A number between 0 and 999 on your credit report that gives lenders an idea of your eligibility for a loan. You need a score of at least 600+ to be considered for a home loan.

D is for…

Deed

The legal document that declares that a particular pile of bricks is yours. It’s one of those important documents you’re going to want to grab – along with your passports – in the event of a fire. Also called a Title Deed.

Deeds Office

The office that’s responsible for the paperwork behind transferring property from one person to another. Sometimes it’s fast. Often, it’s slow. But remain patient: your conveyancing attorney will do all the admin here.

Deeds Office registration fees

Another hidden cost to consider: the amount required for the paperwork at the Deeds Office.

Default

Missed a payment? You have defaulted on your loan.

Deposit

The cash lump sum you put down upfront to reduce the overall amount you have to borrow.

F is for…

Fixed rate

A loan on which the interest rate (the extra you pay on your loaned amount of money) remains the same regardless of market fluctuations.

Foreclosure

Can’t keep up with your monthly bond repayments? Foreclosure is when the bank takes back what is rightfully theirs: your home.

Freehold

‘Free from hold’. This is when you own a building and the surrounding land outright as opposed to being part of a larger unit (that’s called a ‘sectional title’ – see below).

H is for…

Home loan application

Applying to borrow money so you can buy your own home. We can help you compare and apply for a home loan here.

I is for…

Instalment amount

Your monthly repayment, calculated according to the amount borrowed, your interest rate and the repayment term.

Interest

The money you need to pay back to the lender every month. This is over and above the money you’ve actually borrowed. Think of it as what the bank charges you for the convenience of them lending you the money. It’s how lenders make money.

Interest rate

How do lenders decide how much interest you owe them on your loan? They come up with an interest rate (it’ll be a percentage) that’s specific to you.

J is for…

Joint liability

Is someone signing on the dotted lines with you? Both you and your partner will be jointly liable – held responsible – for the contract terms.

L is for…

Latent defect

A fault in the property that could not have been discovered by a reasonably thorough inspection before the sale, like a leaking roof or damp patches that appear during heavy rain. Since this fault is discovered only after the property is handed over and the deal is concluded, it can be difficult – but not impossible – for the buyer to make a claim against the seller.

Lien

The right to keep possession of property belonging to another person until a debt owed by that person is discharged. Kind of like a grown-up version of your mom taking away your Playstation until you’d cleaned your room.

M is for…

Monthly instalments

See ‘instalment amount’.

Mortgage

Aka bond, aka home loan. Whatever you call it, it’s the financing you need to purchase your property.

N is for…

Notice of default

Missed a payment? Your lender will send you a written notice of default warning you that payment has been missed and that legal action may be taken.

O is for…

Occupation

Pack your boxes – it’s moving day! This date specifies when you’re allowed to move into your new abode.

Occupational rental

Do the sellers want to stay on beyond the date of transfer? Do you want to move in before the date of transfer? Enter occupational rental: a pre-agreed-upon amount for either party who wants to be in the home on either side of transfer.

Offer to purchase (OTP)

Close your eyes and hit send! This is the legal document that you’ll send (via the estate agent) to the seller to present your offer to buy their house.

P is for…

Pre-approval/pre-qualification

Getting pre-approved for a home loan before starting your property hunt means you know what you can afford. It’ll narrow down your search and it’ll mean you’re ready to pull the trigger as soon as you find your dream home.

Purchase agreement

Get ready to dot your Is and cross your Ts! This is the paperwork that follows the OTP. It’s the agreement between the buyer and the seller, and facilitates the transfer. It’ll specify things like occupation date, occupational rentals (if any), known defects (if any) and more.

R is for…

Repayment term

The period of the loan, e.g. 20 years.

S is for…

Second mortgage

A loan made in addition to your first – or primary – home loan.

Sectional title

Blocks of flats, apartment complexes, developments… These are all sectional titles. You own a unit within a larger property.

Suspensive condition

A term or clause within the sale agreement that specifies that a specific criterion needs to be met in order for the contract to come into force. For example, a bond needs to be approved or another property needs to be sold by a certain date.

T is for…

Title deed

The legal document that declares that a particular property is yours. See also ‘Deed’.

Transfer duties

Another whack of cash for you to pay. The transfer duty is the tax levied on the purchase of any property. The amount is dependent on the cost of the property. Properties valued at less than R1 000 000 are not subject to transfer fees.

V is for…

Valuation

The valuation process determines whether a home’s value matches its price, looking at factors like the property’s size, its condition, its location and its features. Banks and lenders do this to make sure they aren’t lending you more money than the property is worth.

Variable rate loan

Your interest rate will fluctuate based on market rate changes.

Voetstoots

A very South African legal term, nogal, meaning purchasing ‘as it stands’. The seller is indemnified from any defaults or damages discovered after the sale.

W is for…

Waiver of suspensive conditions

The buyer can cancel the suspensive conditions (see ‘Suspensive conditions’ above), making the contract valid and enforceable without meeting their conditions.

Z is for…

Zoning

Every area (and property) is zoned for specific use: residential, commercial and industrial. Zonings each have several categories that detail building coverage (its footprint as viewed from above), floor area ratio and density. Knowing the zoning of your area will help you establish whether or not the property next door has potential to turn into a towering behemoth or a raging night club.