SEEN THE HOUSE OF YOUR DREAMS, BUT NO FINANCE?

SEEN THE HOUSE OF YOUR DREAMS, BUT NO FINANCE?

You’ve signed for that dream home, done your homework and can afford repayments, have pictured that lounge suite in the family room … and … low and behold, a decline.   The banks decline you, not on affordability but on risk.  Risk being an internal scoring system utilized by the banks determined by various factors, e.g. historical data on home loans not being serviced, the volatility of the industry within which you work, you haven’t worked at your current employer long enough, you are paid cash, or you are self-employed, the list potentially goes on and on.

Enter the “kustingsbrief”, the ‘kissing letter’ translated directly.  The kustingsbrief is effectively a bond, not by a traditional bank, but by the seller of the property.   The seller is permitting the sale, i.e. “sealing the deal so to speak with a kiss”, by allowing payment of the purchase price by the purchaser in instalments and/or within a certain period of time, and in return registering a bond against the property as security simultaneously with transfer of ownership to the purchaser, as a normal traditional mortgage home loan would.  The seller takes the place of a traditional bank in a normal mortgage home loan scenario.

The seller wins in that he has sold his property, if required urgently on e.g. emigration, and his or her security is the property, which can be recalled on any breach by the purchaser, after following the normal processes if an instalment remains unpaid of course.

The purchaser wins as the new owner of his or her dream home and makes the payments monthly, he can afford, despite not being “risk worthy” to a traditional bank.

What is of course a necessity is that the seller’s existing mortgage loan, if applicable, would have to be cancelled as any traditional bank would probably not consent to another form of “bond” being registered against the property, and the seller should not be comfortable standing second in line to any proceeds should payments not be serviced.

This option is literally and physically a win-win for a seller and purchaser working together, to achieve both their respective goals of selling the property and acquiring a home.

Should you require any further information or assistance on this topic please contact us on info@tuckers.co.za, 011 897 1900 or 076 777 1920.

Article contributed by Hayley Appel of Tuckers attorneys.