A
Access Bond
This facility allows you to draw funds up to a predetermined loan amount.

Accrued Interest
Interest earned but not yet paid.

Affordability
The bank needs to assess whether you can afford the monthly installments on the home loan. Your monthly income must be of a permanent nature and joint income may be taken into account where appropriate. The general rule of thumb is that your monthly installment should not exceed 30% of your gross monthly income. This calculation is referred to as the Affordability factor. Affordability factor (AF) = {monthly loan installment divided by gross monthly income} x 100.

Agreement of Sale
Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Annual Premium
This is the premium payable once a year in respect of a life assurance or a home owner's insurance policy

Assessment
The bank's assessed value of the property.

Assessment fee
This fee pays for the administration work associated with a property assessment.

B

BA Linked Rate
Rate linked to 3 month BA SAFEX rate which can be monitored on an ongoing basis. This option guarantees a fixed rate for three months. The rate will change every three months in line with the cost of short term funding rates. This type of product normally has a minimum loan size and a maximum loan to value qualification criteria.

Balance Sheet
Used for the recording of the financial positions of private individuals, companies, cc¿s and trusts.

Bearer / Seller
The legal owner of a property.

Bona Fide
In good faith.

Bond Costs
These are the conveyancer¿s fees, stamp duty and VAT. They are payable by the buyer to the attorney attending to the registration of the bond on behalf of the bank. Conveyancing fees and stamp duty are calculated on a sliding scale based on the bond registered.

Bond registration fee
The fee charged for the registration of the home loan in the buyer's name.

Bond Term
This is the original term of the loan.

Borrower (Mortgagor)
An individual who applies for and receives funds in the form of a loan and is obligated to repay the loan in full under the terms of the loan.

Broker / Estate Agent
An individual who brings buyers and sellers together and assists in negotiating contracts for a client.

Building Contract
A contract between the land buyer and the builder, outlining the specifications of the building.
  
Building Loan
A loan granted to a buyer who purchases a vacant plot of land on which he intends to build.

Buyer's Market
Market conditions that favour buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.

C

Capped Rate
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan.

Ceiling
The maximum allowable interest rate of a variable rate mortgage.

Collateral
Assets (such as your home) pledged as security for a home loan.

Commission
Money paid to a real estate agent or broker for negotiating a real estate or loan transaction.

Contract of Sale
The agreement between the buyer and seller on the purchase price, terms, and conditions of a sale.

Conveyance
The document used to effect a transfer, such as a deed, or mortgage.

Cooling off period
This clause is included in an offer to purchase a property under R250 000. It is based on a new law allowing first time home buyers the opportunity to change their minds within five days of signing the offer.

Credit Bureau
A credit bureau is a clearing house for credit history information.

Credit Report / profile
A report detailing the credit history of a prospective borrower that is used to help determine borrower creditworthiness. There are two main credit companies used by lenders in South Africa, namely ITC and Experian. These companies collate credit history on individuals and companies, which they obtain from various sources in the retail market place and legal system. Your bank account history is another important source of credit information used by banks in assessing your credit profile.

Credit Score
A statistical method of assessing your creditworthiness. Your credit card history; amount of outstanding debt; the type of credit you use; negative information such as bankruptcies or late payments; collection accounts and judgments; too little credit history and too many credit lines with the maximum amount borrowed are all included in credit-scoring models to determine your credit score.

D

Deed
Legal document by which title to real property is transferred from one owner to another. The deed contains a description of the property, and is signed, witnessed, and delivered to the buyer at closing.

Deeds Office
This is a government department whose task it is to attend to the registration of transfers of immovable property.

Deeds Office Registration Fees
These fees are charged by the Deeds Office for registering the mortgage bond/home loan and the title deed.

Default
Failure to meet legal obligations in a contract, including failure to make payments on a loan.

Deposit / collateral
The deposit is the part of the purchase price of the property that you pay in cash up front and reduces the amount that you will need to lend. Banks prefer a deposit as it means that the borrower has a financial commitment in the property and the home loan required is less than the current market value of the property. For this reason the loan to value concept is an important factor in negotiating rate concessions and obtaining loan approval with minimum supporting documentation. Collateral other than property is also taken into account when calculating your loan to value ratio.When a borrower does not have cash available for a deposit, other acceptable types of collateral security include, but are not limited to the following: Shares, fixed deposit, bank/company/government guarantees, debt free immovable property, life assurance policies.

E

Equity
This is the amount by which the value of a bonded property exceeds the amount owing on the loan.

F

Finance Charge
This is the interest charged on the loan.

Fixed Rate
Regardless of whether variable home loan rates fall or rise, the fixed interest rate for the agreed period will continue to apply. This facility would be taken up if the borrower is of the view that interest rates are rising and may do so during the contracted period. Should this option be terminated before the expiry date, an additional finance charge will be levied by the lender. Once the fixed rate period has expired, you may negotiate a new rate with the lender.

Foreclosure (or Repossession)
Legal process by which a mortgaged property may be sold to pay off a mortgage loan / home loan that is in default.

Freehold
This is when you own the property as well as the land it is built on.

G

Grace Period
Period of time during which a loan payment may be made after its due date without incurring a late penalty. The grace period is specified as part of the terms of the loan in the Note.

Gross Income
Total income before taxes or expenses are deducted.

H

Home Loan Application
An initial statement of personal and financial information required to apply for a loan.

I

Initiation Fee
Fee charged by a bank to cover the initial costs of processing a home loan application. The fee may include the cost of obtaining a property appraisal, a credit report, or other closing costs incurred during the process or the fee may be in addition to these charges.

Installment amount
This is the basic monthly installment amount payable on the home loan, excluding insurance or assurance premiums, where applicable.

Interest
Charge paid for borrowing money, calculated as a percentage of the remaining balance of the amount borrowed.

Interest Rate
The annual rate of interest on the loan, expressed as a percentage of 100.

J

Joint Liability
Liability shared among two or more people, each of whom is liable for the full debt.

K

L

Latent Defect
This is a fault or flaw that is not immediately detectable or is hidden from view on inspection of the property.

Lender
The bank, mortgage company, or mortgage broker offering the loan.

Lien
A legal claim by one person on the property of another for security for payment of a debt.

Loan-to-Value Ratio (LTV)
This is the percentage the bank is willing to lend you, expressed as a percentage of the bank¿s estimated value of the property and the loan amount required. Loan to Value (LTV) = [home loan amount required divided by assessed property value] x 100 Home loans of up to and exceeding a LTV of 100% may in certain circumstances be granted, subject to an acceptable Affordability Factor and valuation of the property in question.

M

Monthly Installments
Over the term of your loan, you will repay your home loan by way of regular monthly payments of principal and interest. Monthly installments are normally paid to the lender via debit order from your account. During the first few years, most of your payments will be applied towards interest. During the final years of your loan, your payment amounts will be applied primarily to the remaining principal debt. The amount of your monthly installment can be affected by changes in interest rate and changes to the principal amount of your loan. As a rule of thumb your monthly installment should not exceed 30% of your gross monthly income.

Mortgage Broker
An individual or company that arranges financing for borrowers.

Mortgage or Bond
An agreement between you and the bank, stating that the bank will lend you a certain amount of money in the form of a home loan, and that you will pay the bank back over a certain period, on a monthly basis, and at a certain interest rate.

N

Notice of Default
Written notice to a borrower that a default has occurred and that legal action may be taken.

O

Occupation
This is the date on which the buyer moves into the property.

Occupational Rental
This is paid by the buyer to the seller at an agreed amount, if the buyer decides to move into the property before transfer of ownership takes place.

Offer to Purchase
This is an offer in writing from the buyer to the seller, which is usually prepared by the estate agent. Once signed by all parties, it becomes a legal and binding contract between the buyer and the seller

P

Power of Attorney
Legal document authorising one person to act on behalf of another.

Pre-approval
A bank's firm commitment on a loan. Having pre-approval enables you to enter into negotiations with confidence. A pre-approval includes a preliminary screening of a borrower's credit history. Information submitted during pre-approval is subject to verification at application.

Pre-qualification
Pre-qualifying gives you a general idea of your borrowing power. It is the process of determining how much money you will be eligible to borrow.

Purchase Agreement / Deed of Sale
Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Q

R

Reducing/Step Down Rate
Regardless of whether the variable home loan interest rate falls or rises, the reducing interest rate option will apply for the agreed period (usually less than 5 years). This facility guarantees you that your interest rate will decrease by a set percentage every three to six months for the agreed period. Should this option be terminated before the expiry date, an additional finance charge can be levied by the bank.

Refinancing
The process of paying off one loan with the proceeds from a new loan secured by the same property

Registration
This is the process whereby ownership of the property is transferred from the seller to the buyer via a deed of transfer. Your home loan will be secured at the Deeds Office as a mortgage bond.

Repayment Terms
The length of your loan repayment period will directly affect your required monthly installments. The longer your repayment period, the lower your monthly installments will be, however the total interest cost over the life of the loan will increase. The maximum repayment term is 20 - 30 years and is dependent on the home loan amount.

S

Second Mortgage
An additional mortgage bond placed on a property that has rights that are subordinate to the first mortgage.

Sectional Title
This is an entire complex (flats and townhouses) divided into individual units and sold separately.

Stamp Duty
Stamp duty is a tax imposed by the government.

Suspensive Condition
This is a clause in the agreement of sale whereby the validity of the contract is made subject to the occurrence or non-occurrence of a future event.

T

Term
The period of time between the beginning loan date on the legal documents and the date the entire balance of the loan is due.

Title Deed
Document which gives evidence of ownership of a property. Also indicates the rights of ownership and possession of the property.

Transfer Fee
Fee paid to transfer the property from the seller into the name of the buyer.

U

Underwriting
In mortgage lending, the process of determining the risks involved in a particular loan and establishing suitable terms and conditions for the loan.

Usury
Interest charged in excess of the legal rate established by law.

V

Valuation
A written estimate of a property's current market value completed by a person with knowledge of real estate markets.

Variable Rate Loan
If interest rates rise or drop, the borrower's home loan rate will rise or fall accordingly. This facility is usually taken up if the borrower believes that interest rates are falling and is not too concerned about rising rates. Interest rates only apply to outstanding balances on the loan.

Voetstoots
This clause is always found in a sale document and means ' let the buyer beware'. All defects must be mentioned to the buyer upfront. If there are any defects in the property of which the seller was unaware, the buyer will acquire the property with such defects. 

W