Buying a property is an exciting milestone, but it’s crucial to address all questions related to the transaction before signing to finalise your bond. Understanding the implications of certain life events and potential financial challenges that may lie ahead is essential to protect your investment and secure your family’s future.
“Purchasing a property involves a range of legal aspects that need careful consideration,” says Carl Coetzee, CEO of BetterBond.
“Potential buyers commonly ask sellers or agents why the house they want to buy is on the market, what exactly will be included in the sale, or how much they should budget for maintenance. It’s far more awkward to enquire whether the current homeowner has made sure the compliance certificates are up to date or, if you’re buying with your spouse, to get advice on what will happen to the bond if you get divorced.”
Below, Coetzee looks at important questions that buyers need to ask.
What happens if, in future, I can’t pay the bond?
If you find yourself in financial distress and can’t meet your bond repayments, don’t ignore the situation, cautions Coetzee. ”Contact your bank immediately to discuss your circumstances and explore potential solutions. They may be willing to restructure the bond or offer temporary payment arrangements based on your financial situation,” he says.
What happens if my spouse and I divorce and are both named on the bond?
A divorce can become complex if you are both co-owners and have co-signed on the bond. The fate of the property will be determined in the divorce settlement. You could either sell the property and divide the proceeds, or one of the spouses could buy the other out, thereby retaining the property. Alternatively, some divorced couples may decide to keep the property jointly with careful legal documentation – a scenario that couples with children may opt for.
If you buy a property with a partner outside of a marriage contract, you should draw up a written agreement outlining the details of the arrangement, advises Coetzee. “All terms must be agreed upon in this legally binding contract to avoid any potential issues or confusion down the line.”
Such an agreement, states Coetzee, should entail anything that might result in potential disputes, such as who will pay or contribute towards deposits and initial payments for the property; how ownership will be shared (it is automatically equal if not stated otherwise); who will be allowed to draw funds from the bond; what will happen if you wish to part ways or sell the property; and how profits or losses on the property will be split.
That said, this type of contract is a private agreement between co-owners and does not impose rules on third parties. As far as banks are concerned, for example, you are still equally liable for repayments on the loan. So, if you default on payments, the bank can recover the full amount from any or all co-owners. It would be prudent for each co-owner to take out life insurance geared to cover the outstanding bond should that co-owner pass away.
“Clarity is key to a successful co-ownership agreement. All co-owners must agree on how things will work upfront, leaving no room for ambiguity,” says Coetzee.
What happens to our bond if one of us dies?
If the property has joint ownership between two parties who aren’t married, and one of the owners passes away, the ownership of the property will usually, automatically transfer to the surviving co-owner. In this case, the bond will continue as usual.
What happens if one of us is retrenched?
“It’s advisable to get a protection policy which includes death cover as well as optional disability, dread disease and retrenchment cover,” says Coetzee.
When this isn’t in place, if the other partner has a stable income and qualifies for the bond independently, the bank may consider transferring the bond into their name.
“However, this process usually involves reassessment and approval by the bank based on their income and creditworthiness,” Coetzee adds. Some banks offer retrenchment insurance or payment holidays during difficult times, but these options vary.
Asking awkward questions about your property bond may seem uncomfortable, but it’s crucial to plan for unforeseen circumstances, concludes Coetzee. Seeking professional advice from a qualified attorney or financial advisor can provide valuable insights and ensure your family’s interests are protected throughout your homeownership journey. A well-informed decision today can safeguard your property investment in the long run.