'What is a mortgage bond' is a commonly asked question amongst many prospective home buyers and even existing home owners and one which may appear complicated but can actually be easily answered.

 

Put simply, a mortgage bond is a right over the property of another (usually a bank) which aims to ensure a 'commitment'. The home buyer has a commitment to repay their bank for the money advanced by the bank to buy the respective property or home.

 

Mortgage bonds also involve additional costs over and above the usual transfer fees. What happens is that after a home buyer has signed a purchase agreement, the bank sends a 'valuer' to inspect and value the property.

 

Once the bank is satisfied that the property can provide the necessary security for the requested home loan, it will approve the application and instruct conveyancers to register their security over the property against the title deed.

 

Conveyancers, or entities that transfer the legal title in a property from one person to another, prepare the bond documents to be signed by the home buyer or borrower. Once the bond has been registered in the Deeds Office, the bank will release the amount of the home loan.

 

From this point onwards, if the home owner defaults on his or her monthly home loan repayments. the bank has the legal right to attach the property and sell it off in order to recoup its outstanding loan amount.

 

Known as foreclosure, this should obviously be avoided by home owners at all costs. Also be aware that the bank will also add any foreclosing costs to the total outstanding amount and that it will receive payment before any other creditors.