Most people don’t have the stashed cash to buy a property without some kind of financing option. And if they want to upgrade their home or do renovations, they may need some second bond tips and finance options.
Perhaps you have bought a property at a good price with the intention of doing it up and making it into the home of your dreams? Yes, your first bond will finance your brick bargain, but where do you get the money to turn it into somewhere you would actually like to live? This is where taking out a second bond can be your only choice and is a convenient finance option since you already have taken out your first bond.
A bond is a kind of debt security and often refers to a home loan. Because houses are expensive assets, people don’t often have the cash in hand to pay for the property outright and will need to take out a loan (or bond) from a lending institution such as a bank. The bond is specific amount owed and you are not able to exceed the amount owing.
This means that any further alterations you want to make to the house will come out of your own pocket or from a second bond. If you require additional funds over those provided with your first bond, you can take out a second bond and register it over your property if you have already taken out a first bond. Different lending institutions and banks may have different requirements for you to take out a second bond, but here are some general second bond tips and finance options.
- Make sure the value of your property has sufficient equity for you to be able to sign up for a second bond. If you owe too much on your loan, it is unlikely that you will be granted a second bond. The bank or lending institution will have to conduct a valuation of you home to assess whether or not you should be granted a second bond in terms of how much you owe on the value of your home.
- You must have a good history with your current bond, meaning that you must have paid all debts regularly and on time. If you are in arrears or have defaulted on payments this will reflect poorly on your credit record and you may be denied further lending.
- A second bond may sound well and breezy and like just the fix you need – just remember you still have to pay for it. Before you apply for a second bond, make sure that you can afford it. The bank will be able to calculate whether or not you qualify for a second bond (similar to the way they did when you took out your first bond, as stipulated by the National Credit Act.
- A second bond doesn’t necessarily have to be used alterations and additions to your home; in fact, you are able to use the money from a second bond as you please, covering personal expenses or even a holiday overseas.
- If you are taking out a second bond as debt consolidation (as a means of repaying other debts), this means that you will be taking out a long term debt to pay off short term debts (such as accounts, credit cards etc.) and this can have its limitations.
In terms of financing, the bank will combine the original bond with your second bond, meaning that you will only have one amount to pay each month. Registering a second bond is usually a quick and easy process as no transfer is taking place and all your details are already recorded and registered. When you take out a second bond, there are a number of costs involves including:
- An initiation fee
- The monthly home loan administration fee
- The fee to register your bond
- Valuation fees
Because interest rates on a home loan are usually lower than other types of finance, taking out a second bond can be a cost-effective way of getting your hands on some extra finance.