Getting into the property market is something most people aspire to. Sometimes a property requires the ‘money power’ of two salaries; whether it is to get a home you both need or as an investment. A joint bond may then be the only viable way of getting into the market. While it is possible for two people to have a bond issued jointly in their names, problems can occur if relationships end or circumstances change.
According to Steven Barker, Head of Home Loans at Standard Bank if the relationship that brought about the joint bond ends, or if circumstances mean only one person is paying the bond, the person paying can apply to their bank for a substitution on the bond. What this means is that the paying person will have to enter into a new agreement with the bank and accept sole responsibility for the outstanding balance of the bond.
If a divorce court stipulates that one of the parties will retain the property, the following will take place:
- Even if a court has ruled through a divorce that the property will be held by a single person, that person will still have to be able to prove to the bank that they are able to afford the payment.
- If the payment cannot be met, the bank will not allow a substitution to take place.
- The property will then have to be sold, or another person proposed to be added to the bond as a joint bondholder.
- If no joint bondholder is nominated, a surety who will guarantee payment and support the affordability can also be co-signatory on the bond.
- The same will apply if a joint owner of a bond should pass away, leaving one person registered as an owner on the bond.
“All substitutions, regardless of their cause, will involve the payment of attorney’s fees, deeds office fees and some form of duty,” Mr Barker says. “It is advisable to ask an attorney for an estimate on the fees and costs, and once the bank appoints an attorney, to negotiate the fees with the appointed attorney.”
