Further Bond Bridging
Bond Bridging Advance: Unlock Immediate Financial Potential
In the vibrant landscape of the South African property market, agility and speed are essential. Whether you’re an individual homeowner or a seasoned business owner, the ability to tap into financial resources promptly can be a game-changer. Enter the concept of further bond bridging – a service tailored to give you quick access to the financial power of your approved bond. If you’ve ever found yourself asking, “Why should I wait to access the funds from my bond?” this service is the answer.
What is Further Bond Bridging?
When you’ve been granted a new bond, switch bond, or a further bond, traditional processes might have you waiting for up to 30 days for the bond to be registered and for you to access the funds. This delay can be particularly challenging if you have immediate expenses or if you intend to start renovations or additions to your property right away.
Further bond bridging works by providing you with a portion of your approved bond amount almost immediately after your application is successful and all required documentation is in order. Instead of waiting for the full bond registration, this service allows you to access the funds when you need them the most.
Why Consider Bridging Finance?
Immediate Access
As highlighted, one of the main attractions of this service is speed. With most clients receiving their funds within 24 hours, it offers unparalleled agility in the property market.
Flexible Usage
The funds from further bond bridging can be used for a wide range of expenses, from urgent business costs to immediate home renovations.
Simplified Processes
With a straightforward application process and minimal documentation, it’s designed for convenience.
Bridging the Gap
This service acts as a financial bridge, ensuring that you don’t miss out on opportunities or face delays in your plans due to lack of immediate funds.
What is a Further Bond?
A further bond, often also referred to as a second bond, is a mechanism in the South African property market where a homeowner can borrow an additional sum of money against the equity they’ve built up in their property. This is over and above the primary home loan they may still be paying off.
Why consider a Further Bond?
1. Increased Property Value
Over time, as properties appreciate in value, homeowners can access this increased equity without having to sell or move.
2. Consolidation of Debt
With the potential of a lower interest rate than other forms of credit, homeowners often use a further bond to consolidate other, more expensive debts.
3. Home Improvements
Renovations, expansions, or improvements can add to the value of a home. Using the equity in one’s home can be a smart way to fund these, especially if these changes will further increase the property’s value.
What is a Bond Switch?
A bond switch refers to moving your home loan from one bank or financial institution to another. This is typically done to take advantage of more favourable interest rates, better service, or additional home loan features that another lender might offer.
Why consider a Bond Switch?
1. Better Interest Rates
Over time, as economic conditions change, some banks might offer more competitive interest rates than what you’re currently paying.
2. Improved Service and Terms
If you’re dissatisfied with your current lender’s service, switching might provide you with a better customer experience or flexible terms.
3. Loan Features
Different banks may offer unique features on their home loan products, such as access to additional funds, flexible repayment terms, or even loyalty benefits.
The Bond Switching Procedure
Here’s a step-by-step outline of the general procedure:
- Research & Quotation: Before initiating the switch, homeowners should research different banks and financial institutions to understand their offerings. This includes interest rates, fees, and any additional benefits. Once a bank has been chosen, request a formal quote or proposal.
- Formal Application: If satisfied with the quotation, homeowners will then apply formally with the new bank. This will involve completing application forms and providing all necessary documentation, similar to the original bond application.
- Property Valuation: The new bank will conduct a valuation of the property. This is to ascertain the current market value and determine the amount they’re willing to lend.
- Credit Checks: The bank will conduct a credit check to ensure the homeowner’s creditworthiness. This is to ensure that the applicant is in good standing and capable of repaying the bond.
- Bond Approval & Offer: If the credit check and property valuation are satisfactory, the bank will approve the bond switch and issue an offer. This will detail the new bond amount, interest rate, and any conditions attached.
- Cancellation of the Original Bond: Once the bond switch offer is accepted, the homeowner’s original bond needs to be cancelled. There might be a notice period and potentially a cancellation penalty or fee involved, depending on the terms of the original bond.
- Bond Registration: A conveyancer or property attorney will handle the bond registration process at the Deeds Office. They will register the new bond and cancel the old one.
- Settlement of Original Bond: The new bank will settle the outstanding amount of the original bond using the funds from the new bond. This process ensures that the original bank gets paid the remaining amount owed to them.
- Transfer of Monthly Repayments: Once the switch is complete, monthly repayments will now be made to the new bank as per the new bond agreement.
- Review of Homeowners Insurance: It’s also a good time to review and potentially update your homeowner’s insurance policy, especially if required by the new bank.
As we’ve mentioned, a further bond bridging advance is a specific financial tool designed to provide homeowners with quick access to funds before the full registration and finalization of either a further bond or bond switch. It acts as an “interim” financial solution while the main bond process is being finalized.
Let’s look at a real-world example to illustrate where a further bond bridging advance fits into the bond switching process:
Jane and Bond Switching:
Jane, a homeowner in Johannesburg, has been with her bank for the past ten years. After some research, she discovers that another bank offers a more favorable interest rate and better terms. She decides to switch her bond to this new bank. Additionally, she wants to make use of the equity she’s built up in her home over the years and applies for a further bond to fund extensive home renovations she’s been planning.
- Research & Quotation: Jane gets a formal quote from the new bank and is pleased with what they offer.
- Formal Application: She applies formally with the new bank, providing all the necessary documentation.
- Property Valuation & Credit Check: The bank evaluates her property and conducts a credit check. Everything looks good, and the bank approves her bond switch and further bond.
- Bond Approval & Offer: Jane receives an offer detailing the new bond amount, interest rate, and conditions.
Here’s where the Further Bond Bridging Advance comes into play:
Jane’s contractor informs her that if she can make an upfront payment within the next week, he can start the renovations immediately. However, the bond switch and further bond registration process will take up to 30 days. Jane doesn’t want to miss out on this opportunity with the contractor.
- Further Bond Bridging Application: Jane approaches a financial institution that offers further bond bridging advances. She applies for an advance against the approved further bond amount.
- Bridging Advance Approval: After a swift assessment and upon the strength of her approved further bond, Jane is granted a bridging advance. She now has immediate access to a portion of the funds.
- Immediate Use of Funds: Using the bridging advance, Jane makes the upfront payment to her contractor. The renovations commence without delay.
- Completion of Bond Switch and Further Bond Registration: As the bond switch and further bond finalize over the coming weeks, Jane’s bridging advance will be settled from the proceeds of the further bond once the funds are released.
- Settlement of Bridging Advance: Once the further bond is registered and the funds are accessible, the bridging advance is automatically settled, and Jane continues with her new bond’s regular repayments.
This scenario showcases the utility and flexibility a further bond bridging advance offers homeowners in the South African property market. It enables individuals like Jane to act swiftly, leveraging the promise of future funds for immediate needs.
Property Bridging Finance Application Criteria
As long as the attorney handling the transfer is prepared to sign a Letter of Undertaking that the purchaser has put up guarantees, that all suspensive conditions have been met and that funds will be dispersed to the bridging company on transfer, then it is possible to arrange an advance of your profit i.e. property sale proceeds advance.
Costs
Minimum Term – When property transfers
Maximum Term – 3 months
Minimum APR – 48 %
Maximum APR – 54 %
Example
Loan R 100 000
Term 65 days
APR 48 %
Repayment R 108 645
Subject to lenders Terms and Conditions at time of quote.
FAQs about Property Bridging Finance in South Africa
Q: What exactly is a further bond?
A: In the South African property context, a further bond (also known as a second bond) refers to additional borrowing against the equity you have in your property, over and above your primary home loan.
Q: How much of the approved bond amount can I access immediately?
A: The exact percentage can vary based on the service provider, but it’s common to receive a significant portion of the approved bond amount upon successful application.
Q: Are there any fees or interest associated with further bond bridging?
A: Yes, as with any loan service, there will be fees and interest associated with further bond bridging. It’s essential to discuss the exact rates and terms with your service provider.
Q: What happens if the bond registration is delayed beyond 30 days?
A: The service provider will typically have provisions for such scenarios. However, it’s crucial to understand the terms beforehand to manage any potential additional costs or fees.
Q: How is further bond bridging different from a loan against property?
A: While both provide immediate funds against property value, a loan against property is typically a longer-term loan secured against the property’s equity. In contrast, further bond bridging is a short-term solution to access funds from an approved bond promptly.
Q: Can I use the funds for purposes other than property-related expenses?
A: Absolutely! While many use the funds for renovations or additions, the money can be used for various expenses, personal or business-related.
Q: Are there any risks involved?
A: As with any financial product, it’s essential to understand the terms fully. Ensure you’re comfortable with the repayment structure and aware of any penalties or fees.
Q: How quickly do I need to repay the bridged amount?
A: The bridged amount is usually repaid once the bond is registered, and the main bond funds are released.
Q: What if my bond registration gets declined after using the bridging service?
A: It’s crucial to discuss such scenarios with your service provider. In many cases, alternative repayment structures or provisions can be made, but understanding these beforehand is vital.
Q: How do I know if I’m eligible for further bond bridging?
A: Eligibility usually depends on the successful approval of your bond. Once that’s in place and you provide the necessary supporting documentation, you can typically avail of the bridging service.