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A bond in property terms is basically a home loan that you get from a bank or financial institution to buy a house. Since most people don’t have the full purchase price of a property in cash, they borrow the money and then pay it back over time with interest.
Here’s how it works:
1. How a bond works
- You apply to a bank for a home loan.
- The bank assesses your income, expenses, credit record, and affordability.
- If approved, the bank lends you the money to pay the seller of the house.
- You then repay the bank monthly until the loan is fully settled.
2. What you pay for
- Capital – the actual amount you borrowed.
- Interest – the cost of borrowing, usually linked to the prime lending rate.
- Fees/Insurance – sometimes banks include administration fees and require you to have home insurance.
3. How long you can pay it off
- In South Africa, the standard repayment term is 20 years (240 months).
- Some banks allow shorter terms (e.g., 10 or 15 years) if you want to pay it off quicker.
- In certain cases, a bank might approve up to 30 years, but this is less common.
4. Flexibility
- You can pay extra into your bond whenever you want – this reduces the interest and helps you pay it off faster.
- If you struggle financially, some bonds offer options like payment holidays or restructuring, but these usually extend your repayment term and cost more in the long run.
👉 In short: A bond is a loan to buy property. The bank pays the seller, and you repay the bank monthly over 20–30 years, covering both the loan and interest.
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