Author: Nicolas Nel
Are you entering the housing market but lacking the financial resources?
A joint home loan application is a great way to increase your chances of having your bond application approved for the requisite amount.
In a joint home loan application two or more parties sign and accept responsibility for the bond repayments. By combining the income of all the parties to the application, the likelihood of being granted the bond is increased.
JOINT BOND APPLICATION
A joint bond application follows the same processes and requires the same documentation as in an individual bond application. The major difference is that the bank will now consider the joint income and credit scores of every party to the application.
Banks are required to comply with the National Credit Act (NCA) when granting credit to applicants. Section 80 read with section 82 of the NCA requires banks to assess your income and expenditure when granting a bond. If any of the parties to the application have an impaired credit score, it must be taken into account when considering the application. Therefore, only when the other parties to the home loan applications earn an income and have a credit score at least on par with yours, will a joint bond application be beneficial.
CONSEQUENCES OF THE JOINT BOND
By signing a joint bond agreement, you and the other parties become jointly and severally liable for repayments, taxes, and other administrative expenses associated with the bond and purchase of the property. This means that all parties to the agreement are 100% responsible for the bond repayments. Should one party stop making repayments, the other parties will still be responsible to make full repayment.
PRACTICAL THINGS TO LOOK OUT FOR
In 2018 the Ombudsman for Banking Services South Africa released a consumer note highlighting some practical difficulties when it come to joint mortgage bonds.
Firstly, the Ombudsman outlined an issue pertaining to the access bond facility. It was noted that complaints are often received when one party to the agreement withdraws amounts from the access bond facility without the consent the other party. It is therefore important to carefully monitor any access facility on your account.
It is furthermore important to inform yourself about the details of the credit life cover taken out to cover the bond. The Ombudsman notes complaints whereby following the death of one of the parties to the bond, it is found that the life cover only covers the life of the surviving party. It would be advised to carefully read through your insurance policies to ensure it is tailored to your preference on top of covering the minimum requirements prescribed by the bank.
Joint bond applications offer an opportunity where an individual application might not. With consideration of the above, the downsides to joint bond applications can be reduced.