Registration of mortgage bonds

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REGISTRATION OF MORTGAGE BONDS


Due to the financially demanding times in which prospective purchasers find themselves, it has become increasingly difficult to purchase fixed property without seeking some form of finance.

In order to provide finance, financial institutions insist upon some form of security and this is where a mortgage bond arises.

A mortgage bond is registered over the fixed property in order to secure the purchaser’s/the registered owner’s obligation to re-pay the money lent to him by the financial institution.

The mortgage bond comprises of two parts:

- The loan agreement with the financial institution who has lent the money and - Registration of the mortgage bond in the
Deed’s Registry.

The purchaser of the property who agrees to register the mortgage bond is known as the mortgagor. The institution advancing the money is known as the mortgagee.

It is possible to register a mortgage bond as security for any existing or future debt, e.g. overdraft facilities, initial capital for a business, etc.

THE DIFFERENCE BETWEEN THE REGISTRATION OF A MORTGAGE BOND AND THE TRANSFER OF A PROPERTY

These are related yet totally separate transactions. A transfer is the conveyance or transfer of ownership in fixed property from one owner to another.

The mortgage bond represents the security offered to the financial institution for the loan, which the bank is prepared to
advance in payment of the purchase price of the property.

DOCUMENTS THAT NEED TO BE SIGNED

THE POWER OF ATTORNEY TO REGISTER A MORTGAGE
BOND

This is a document signed by you as purchaser of the property (mortgagor), which enables the conveyancer to register the
mortgage bond simultaneously with the registration of transfer of the property. A draft of the mortgage bond to be registered in the Deeds Office is attached to the Power of Attorney and initialled by you for identification purposes. Important information contained in a mortgage bond includes the mortgagor’s name, identity number,marital status, the mortgagee’s details, the amount of the bond as well as a complete description of the property to be
mortgaged.

THE MORTGAGE LOAN AGREEMENT

This document is sometimes signed at the bank, but ordinarily the bank requires the conveyancer to assist the mortgagor in signing the Mortgage Loan Agreement, the Conditions of the Loan and Standard Terms and Conditions of Mortgage Bonds. This
document contains details such as the loan amount, interest rate, installment amount, special conditions, etc.

AUTHORITY FOR PAYMENT

This document authorizes the conveyancer to make the necessary payments from the proceeds of the bond on the date of registration. Usually at least two authorities are signed, one in favour of the existing bondholder to cover the amount
outstanding on the seller’s existing bond.

MARITAL STATUS AND SOLVENCY DECLARATIONS

These declarations are required by law and enables the conveyancer to be sure of the mortgagor’s marital and solvency
status.


TERMINOLOGY USED IN BONDS

Unusual terminology is sometimes encountered in mortgage bonds. Clients regularly approach the conveyancer for explanations of the terminology. We would like to clarify a few:

THE ADDITIONAL AMOUNT

This amount which normally consists of 20% of the bond amount, hardly ever comes into operation for most mortgages. It is an extra amount, which the bank may claim in the case of default by the mortgagor. Should the mortgagor default in paying installments, the mortgagee has the right to use the additional amount to cover legal and other costs incurred in tracing the mortgagor and finally selling the property in a judicial sale/auction.

WAIVING OF LEGAL EXCEPTIONS

These terms are mainly in Latin and have standard meanings.

Those that are used regularly are explained below:

- non numeratae pecuniae

The mortgagor is prevented from pleading that no money has been paid over to him/her or that he/she has not received any value from the mortgagee.

- non causa debiti

The mortgagor is prevented from pleading that there is no cause of indebtedness to the mortgagee.

- errore calculi/revision of accounts

The mortgagor is prevented from pleading that there was an error in the calculation of the amounts due by the mortgagor to the mortgagee.

- de duobus vel pluribus reis debendi

Should there be more than one mortgagor, each is collectively and individually responsible for the full amount of the debt.

TYPES OF MORTGAGE BONDS

It is also important to realize that there are different types of mortgage bonds. Financial Institutions market their special types of mortgage bonds under different names, but these are mainly variations of the following:


THE STANDARD MORTGAGE BOND

This is the mortgage bond, which entails payment of usually a monthly (or other arranged period) installment. The causes of such a mortgage bond could be money lent or advanced, balance of the purchase price, or goods and services supplied, as for e.g. in the case of a mortgage bond which you register when you purchase a new home.

A variation on this type of mortgage bond is the “Access Bond”, which allows further withdrawals to be made from the bond account, enabling the mortgagor to withdraw money from the bond account after a certain amount has been paid off.

Another new development is the “Fixed Rate Agreement”. This implies that the mortgagor and mortgagee decide on a fixed interest rate for a specified period. The interest rate is not linked to the prime rate during this period. This enables the mortgagor to plan his/her finances more effectively for a limited period of time.

COVERING BOND

This type of mortgage bond is used to cover future debts. The mortgagor intends to borrow money from the bank in the future and to that end registers a mortgage bond large enough to cover the full loan amount. The mortgagor of course only pays an installment on the actual debt at each stage.

SURETY BOND

This bond is passed to secure the debt of someone else. The surety registers a mortgage bond over his/her own property in favour of the creditor as surety for the principal debtor’s debt.

INDEMNITY BOND

This bond is usually passed by a mortgagor in favour of a surety who has guaranteed the repayment of a debt secured by a mortgage bond passed by the mortgagor over his property. This bond is passed as security to indemnify the surety in the event that he is called upon to pay.

NOTARIAL BOND

This bond is a standard bond, which is registered over movable property such as vehicles, machinery and equipment.


BUILDING BOND

This type of bond is similar to a standard mortgage bond in many respects. An “authorization for payment” must be signed over and above the normal documentation, which enables the bank to release funds as the work progresses. After the client has
indicated via the authorization of payment that he/she is satisfied with the work done, the bank sends a valuator to the premises to recommend an amount of money to be paid out. Some banks have a special building loan document by means of which the client applies for settlement of the full amount of the loan.

THERE IS A DIFFERENCE BETWEEN A SECTIONAL TITLE MORTGAGE BOND AND A STANDARD MORTGAGE BOND

SECTIONAL TITLE MORTGAGE BOND

The mortgagor passes the sectional title mortgage bond over a sectional title property, i.e. townhouse/duet house. The
mortgagor appears before a conveyancer to execute/pass the bond. It is then registered in the Deeds Office by the Registrar of
Deeds.

COSTS OF REGISTERING A BOND

The statement of account for the registration of a bond comprises of the following items:

BOND REGISTRATION

This is the conveyancer’s fee for drawing the documents and attending to the registration of the bond. It is determined by tariff
guidelines issued in terms of the Deeds Registries Act 47 of 1937.

REGISTRATION FEE

Fees for the registration of mortgage bonds are payable to the Deeds Office. These fees range from R200.00 to R1 000.00
depending on the capital amount of the bond.

POSTAGE AND PETTY EXPENSES

These represent the conveyancer’s costs for telephone calls, facsimile transmissions, postage, stationary etc.

DEEDS OFFICE SEARCH FEE

This is an electronic computerized search by the conveyancer on the property and/or owner of the property.


VAT

Value Added Tax is payable on services rendered i.e. our fee, postage and petty expenses and the Deeds Office search fee.


OUR PROFESSIONAL TEAM IS ON YOUR SIDE!

The professional team of VAN DER MERWE DU TOIT INCORPORATED is dedicated and motivated to rendering the best service possible to you, our client. Should you have queries, kindly contact any member of our conveyancing department.