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How To Dissolve Joint Liability In A Mortgage Bond - With Unmarried Couples, Friends & Family

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How To Dissolve Joint Liability In A Mortgage Bond - With Unmarried Couples, Friends & Family

Category Home Loans

With a joint bond (home loan) one can enter into a mortgage bond with a co-applicant to whom you are not married - be it a partner, family member, or trusted friend. A joint bond refers to a bond guaranteed by at least two parties and is a familiar occurrence in the realm of South African homeownership. The additional parties agree to take on responsibility for paying the bond if the first party defaults. Joint bonds can be held by companies, but they can also be held by a couple. Even couples who are not ready to get married have options when it comes to a joint bond. Once the bond is paid off, the couple will co-own the property.

However, as circumstances evolve, individuals may find themselves contemplating the possibility of terminating their joint liability in the mortgage agreement. If one of the joint bond holders chooses to withdraw, the other will be responsible for the entire payment. The bank does not care about the status of the relationship. A new deal can be signed with the bank if one party leaves. However, that party will have to consent to having their name removed from the bond document. If they refuse to do so, an attorney may need to be consulted.

This article explores effective strategies and legal avenues that can be pursued when seeking to dissolve joint liability within a mortgage bond. By understanding the available options, individuals can navigate this complex process with confidence and safeguard their financial independence.

Terminating a Joint Bond by Mutual Agreement

When both parties involved in a joint bond reach a consensus to cancel the mortgage agreement, there are two primary avenues to consider. The first option entails jointly notifying the bank, which initially granted the mortgage bond, about the intention to terminate the bond.

To ensure a smooth cancellation process, it is crucial to provide the bank with a 90-day notice prior to the desired termination date. This advance notice helps avoid any potential penalties imposed by the bank. Once the notice is received, the bank will engage the services of attorneys to formally cancel the mortgage bond at the Deeds Office, a vital administrative procedure.

As part of the cancellation process, the bank will furnish the attorneys with specific figures known as cancellation figures. These figures encompass the outstanding balance on the bond, inclusive of any accrued interest and associated fees. Settling this amount is essential for the successful cancellation of the existing mortgage bond. To achieve this, a guarantee issued by the bank must be obtained and used to settle the outstanding obligations.

In cases where the property is not being sold, the parties involved will be required to deposit the outstanding amount into the trust account of the appointed attorneys. This deposit will enable the attorneys to obtain the necessary guarantee from the bank. Conversely, if the decision is made to sell the property, the purchaser must provide a guarantee derived from the purchase price, which will serve as collateral for the existing mortgage bond.

By following these prescribed steps and adhering to the established procedures, both parties can successfully terminate their joint liability under the mortgage bond, ensuring a seamless transition and protecting their respective financial interests.

Terminating Joint Liability when One Party Wishes to Assume Sole Responsibility

Another approach to terminating joint liability in a mortgage bond arises when one of the parties decides to assume full responsibility for the bond, thereby becoming the sole debtor. In such cases, the parties involved can initiate the process by applying to the bank for a "substitution of debtor" instruction.

It is essential to highlight that the bank will conduct a credit assessment to ascertain whether the party seeking sole liability can adequately afford the property on their own. Upon satisfying the bank's criteria, the bank will engage the services of attorneys to handle the substitution of debtor procedure at the Deeds Office.

It is worth noting that attorney's fees will be applicable for both the cancellation of the joint bond and the subsequent substitution of debtor instruction. These fees are associated with the legal processes involved and ensuring a smooth transition.

In addition to addressing the mortgage bond matters, a formal transfer of property ownership must also be executed. Since mortgage bond liability is intricately linked to ownership, it becomes necessary to appoint a Transferring Attorney to facilitate the simultaneous transfer of ownership alongside the aforementioned processes.

By adhering to these comprehensive steps, including the substitution of debtor and property transfer procedures, individuals can effectively dissolve joint liability while ensuring legal compliance and safeguarding their respective interests.

Can You Cancel a Joint Mortgage Bond?

In summary, terminating a joint mortgage bond is possible under specific conditions. There are two main options for terminating the bond: complete cancellation by both parties or substituting one party as the sole debtor. In the case of cancellation, the entire outstanding mortgage bond amount must be settled. On the other hand, when opting for substitution, the bank will assess the party's affordability and make a decision based on their discretion. It is important to consider these factors when seeking to dissolve a joint mortgage bond.

 

Author Cor van Deventer / Van Deventer & Van Deventer Inc Attorneys
Published 12 Jul 2023 / Views -
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