Page 17 - Nexia SAB&T Property & Tax Guide 2022

HOME LOANS AND MORTGAGE BONDS

HOME LOAN AND MORTGAGE DISCLOSURE ACT (63 OF 2000)
A “home loan” is defined as a loan or advance by a financial institution to a person for
purposes of constructing, purchasing, renovating or improving a home against security of a
mortgage bond or other accepted form of security.
When mortgage finance is necessary, a suspensive condition will be included in the Offer to
Purchase setting out the specific terms under which the finance must be approved and these
conditions must be fulfilled on or before the time limit stated in the contract, failing which
the contract will lapse and be null and void. It cannot be reinstated, even with the agreement
of the parties by means of signing an Addendum. Due care should be taken to properly
understand the conditions relating to the Bond approval, as once the mortgage bond condition
and any other suspensive conditions have been fulfilled, a binding, enforceable contract
comes into existence. Financial institutions reserve the right to withdraw the approval should
any new or previously undisclosed facts emerge, or should there be a change in circumstances
which may prejudice the rights of the financial institution. Financial institutions may also
require an Occupancy Certificate from the Local Authority before registering a mortgage bond.
Where the prime interest rate quoted by the financial institutions is increased, the facility in
terms of the mortgage bond approval may be withdrawn in the event that the banks find that
their rights are prejudiced due to the increase in the bond rate. The withdrawal of the approval
does not affect the Seller’s rights to argue that the transfer of the property should proceed as
the suspensive conditions were fulfilled. This would place the purchaser in the position that
the transfer would have to proceed on a cash basis.
THE HOUSING CONSUMERS PROTECTION MEASURES ACT (95 OF 1998)
In terms of Section 18, no financial institution shall lend money to a housing consumer against
the security of a mortgage bond registered in respect of a home, with a view to enabling
the housing consumer to purchase the home from a home builder, unless that institution is
satisfied that the home builder is registered in terms of this Act and that the home is or shall
be enrolled with the National Home Builders Regulation Council (the Council) and that the
prescribed fees have been or shall be paid. A conveyancer attending to a bond registration
for a housing consumer who is borrowing funds to purchase a house from a home builder
is required to ensure that the home builder is registered and the home is enrolled. A home
builder in terms of this Act refers to a person who carries out the business of a home builder,
and only applies to any dwelling unit constructed by a home builder for residential purposes.
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