Top 6 tips you need to know before taking a mortgage with your property
Once you have acquired property there are various ways you can make the property work for you. One of the ways is to take a mortgage.
- What is a mortgage?
A mortgage is a type of loan that you take on which the security you provide will be your property. You have the own the property you are taking a mortgage over unless it is a surety mortgage bond.
- What does it mean to have a mortgage bond?
If you have a property, you can use it to take a loan with your property and use that property as security at a financial institution. The financial institution will then give you the money on loan which you will repay with monthly instalments. How you use the money is up to you, you can use a mortgage loan to buy property, to buy other properties with the property you already have, you can even use a mortgage loan to renovate your property.
- What happens if I don’t pay my mortgage?
When you don’t pay your mortgage, your property will be repossessed by the bank and sold on public auction.
This process is called an auction. The property will be advertised by the deputy sheriff with a set date on which the auction will take place. On the day of the auction the bidders will attend and bid for the property. The highest bidder will be chosen and the deputy sheriff will transfer the property to the highest bidder who will then become the new owner. The new owner will be paying for the debt of the old owner who failed to pay for the mortgage loan.
- Can I take a mortgage loan on someone else’s property?
Yes you can. This is called a surety mortgage bond. This allows you to be the person who takes the mortgage loan but the security you use will be for the property owned by someone else. For instance, a husband can take a surety mortgage bond over property which is registered in the names of the wife especially if they are married out of community of property.
However, one must be careful because you should make sure that you only allow yourself to be surety if you know that the person you are assisting has the finances to repay the mortgage loan on monthly basis until the entire debt is paid out. This is because if the person you are being a surety for, does not pay the monthly instalments then your property is at risk of being repossessed and sold at a public auction to repay the mortgage taken with your property.
- Where can I get a mortgage bond?
Mortgage bonds like all loans can be obtained from financial institutions. In Botswana for instance, there are a variety of financial institutions or banks. However, what is important is to make sure that the financial institution you approach for a mortgage bond is one which had been registered to offer such kind of loans.
- How to take a mortgage bond
It is important to always know how much money you want to take as a loan from a financial institution. Also remember that the amount of money you take, you are going to have to pay it back. So only borrow what you can afford.
It is also important to know the value of your property as that determines the amount which you will qualify for. Financial institutions tend to require a valuation report when dealing with a mortgage bond so be prepared to pay for a valuation report.
Lastly, be sure to get quotations from various financial institutions to see how much money you qualify for, how much interest you will be paying and the duration of the loan. Once you have all this information, then you can choose the financial institution that gives you a great deal.
Remember a mortgage loan is a contract and like all contracts you need to be aware of what you are signing, what you are getting and what your obligations will be. All legal contracts are enforceable by the law therefore breach of contract has consequences. Be sure to stay informed and make the right decisions.
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