How I bought a property without Mortgage Bond

I visited Mumbi Properties (Pty) Ltd 3 years ago when my bond was rejected by the banks numerous times. In the current economic circumstances this is not uncommon and with the NCA (National Credit Act) in full swing, it is becoming more and more difficult to get mortgage bonds for home purchase.

My situation was a bit different though. I had purchased a number of other properties before and still had one of the properties under my name and my wife’s name. Having invested in two other properties before, I was confident that the rental income from the other two properties was going to convince the funders to fund the purchase of a new property.

I found the perfect property! The seller was what is popularly known as a distressed seller.

The property was on a 1000sqm stand with 3 bed, 2 ½ bath property with TV Room, 2 lounge areas, new kitchen, expansive servant quarter and garage that could be converted into an extra storage area. My instant idea was to make it an office and this fitted my requirements perfectly. This is when I put an offer and a deposit of R100,000 from a purchase price of R750,000. Additionally, I had left some money for renovation and completion of the property from the previous seller which added up to R220,000.

To my surprise, the banks had other ideas. Probably due to my folly, probably due to my ignorance. First, I had too many mortgage bonds under my personal name – bad idea! Secondly, I was a business owner / self-employed – this is a high risk category for any mortgage application.

I therefore got declined by all the banks and could not secure what I thought was going to be a good property investment. Above all, my business was going to pay rental on this property that would go towards repaying the bond from the bank.

After much agonizing, Mumbi Properties came to the rescue. They informed me of this form of transfer known as ISA (Installment of Sale Agreement) where the seller finances the property over a certain duration. To my surprise, the seller unduly agreed and we proceeded to get the Conveyancing Attorney to structure the agreement. The agreement was structured to have an Occupational Rental, with NO monthly capital payments. The outstanding rates, taxes and utilities were factored into the purchase price. Any additional payments done during the period, went towards payment of the initial capital.

After 18 months of monthly payments, I had sorted out my ‘NCA’ profile and had more than 40% of equity in under the bank’s valuation. On applying for a bond, Standard Bank came to the party and offered the full bond on the remaining amount of the purchase price.

Were it not for Mumbi Properties perseverance, I would have lost the property. Now I have turned it into an office and would use them and the ISA process again anytime!

*Reuben GM

*Trustee of Ibmum Investment Trust

*True identity not Revealed.

 

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