Buying property with someone other than a spouse is gaining popularity as it offers cash-strapped consumers the perfect opportunity to enter the property market.
On paper, it’s a smart decision, but there are a number of factors that need to be considered before you go down this path to avoid potential headaches down the line.
The process for co-applying for a bond is similar to an ordinary bond application as far as being subjected to the usual credit and affordability assessments is concerned, so it’s important that both of your credit records are in order before you apply.
When you’re considering this option, remember that partnering with the right person is critical because your neck is also on the line because should the person you partner with fail to keep up with the monthly instalments, your credit record will be negatively impaired.
During the application process, both parties need to sign all the necessary documents such as the offer to purchase, home loan quote and legal documents.
Most importantly, the monthly debit order amount has to come from one account.
As a result, this will have to be agreed beforehand to ensure that there are always funds available to avoid defaulting on the monthly bond repayments.
Equally important, says Mpho Ramatong, FNB Home Finance Division channel head for Housing Schemes, is making sure you draw up an agreement which stipulates clearly what your common objections are in order to avoid potential complications further down the road.
“If you are purchasing a family home and one member decides to pull out of the bond agreement, a new bond application will have to be processed and a full credit assessment conducted on the application to verify affordability,” he warns.
While taking out life and disability insurance is a standard requirement for most banks, it’s not always a prerequisite for some financial institutions, so the onus is on you and your co-applicant to ensure that you are covered in the event of one party’s death.
“Before taking this important step, it is advisable for all potential co-applicants to seek advice from their bank or an expert to ensure that they are adequately prepared for this commitment,” Ramatong advises.