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Loans against property

Own fully paid up property? Use it as security for a loan.

Secure finance against your bond-free (fully paid-up) property if the value of the property is more than R1 million and you have a legal entity.

New Heights Finance is a finance broker that doesn’t directly provide loans. We partner with various financial institutions to offer you a variety of loan options and help you compare different products. New Heights Finance may earn a commission, which is usually a fixed percentage of the loan amount and can vary depending on the lender.

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Using property as security for a loan

Loans against property are quick and easy, using bond-free property as loan collateral. Use your unbonded personal property or business property as security for a property term loan. A maximum of 50% of the open market value is generally lent.

What is Bond-Free Property?

A bond-free property is a property that is not encumbered by a mortgage bond or any other form of debt secured against it. In essence, it’s a property that is owned outright, without any outstanding financial obligations to a lender.

Using Bond-Free Property for a Loan

In South Africa, a bond-free property can serve as excellent collateral for securing a loan. This is because it represents a tangible asset with significant value. When you take out a loan against your property, you’re essentially offering the lender a security interest in the property. If you default on the loan, the lender can take possession of the property and sell it to recover their funds.

A property-backed loan is for you if…

Need a loan for your business?

Get the financial resources you need to take your business to the next level.

Own a bond-free property?

Purchase stock to capitalize on new opportunities.

Property is valued at over R1 mil?

Upgrade your equipment to improve your operations and output. 

You have a CC, Pty. Ltd or Trust

Purchase new or additional vehicles for your business.

Loan Conditions

Loan Term: From 6 month to 12 months 

Property Status: Bond-free, owner holds title deed

Property Value: Over R1.5 million

Maximum Loan: 50% of open market value

Interest: 2.8 – 4% per month

Cost Schedule

    Property Value: R 1 000 000
    Loan Granted: R 400 000
    Bond Reg Costs: R 12 000
    Attorney Fees: R 8 000
    Initiation Fee: R 12 000

    Funds Available: R 368 000 ( to Client)

    Interest Rate:  2.8% – 4% per month

    Once-off Costs: 3% fee

    Term: 6 – 12 months 

    Subject to lenders Terms and Conditions at time of quote

    Types of loans against property

    • Home Equity Loans: This is a type of loan where you borrow against the equity in your home. If you have a bond-free property, you can use it as collateral to secure a home equity loan. The funds can be used for various purposes, such as home renovations, debt consolidation, or education.
    • Personal Loans: Some lenders may offer personal loans secured by a bond-free property. This can be a good option if you need a larger loan amount or have a less-than-perfect credit history.
    • Business Loans: If you own a business and have a bond-free property, you might be able to use it as collateral to secure a business loan. This can be a way to access funds for business expansion, equipment purchases, or working capital.

    Benefits of equity release

    • Lower Interest Rates: Lenders often offer lower interest rates on loans secured by bond-free property due to the reduced risk.
    • Larger Loan Amounts: You may be able to borrow larger amounts of money compared to unsecured loans.
    • Flexible Repayment Terms: Lenders can offer more flexible repayment terms, such as longer loan durations or interest-only periods.

    • Use the money as needed:

      • Clear your business debt, using your bond-free property.
      • Inject cash into your business.
      • Pay outstanding invoices.
      • Take advantage of a new contract by getting a business loan against
        your property.
      • Buy a new property while your current home is on the market and you await a conclusive sale.
      • Fund shortfalls on a cash purchase.

    How loans against property work

    Registration of a Bond:

    • Security Agreement: When you use your bond-free property as collateral for a loan, you typically enter into a security agreement with the lender. This agreement outlines the terms of the loan, including the interest rate, repayment schedule, and the lender’s rights to the property in case of default.
    • Bond Registration: The lender will register a bond over your property at the Deeds Office. This bond is a legal document that creates a security interest in the property in favor of the lender. It essentially gives the lender the right to take possession of the property if you fail to repay the loan.

    Title Deed Transfer:

    • Deed of Transfer: The title deed of your property is a legal document that proves your ownership of the property. When you use your property as collateral, you typically transfer the title deed to the lender as security. This means that the lender holds the title deed until the loan is fully repaid.

    Repayment and Cancellation:

    • Loan Repayments: As you make regular payments on the loan, the outstanding balance decreases.
    • Final Payment: Once you’ve made the final payment on the loan, you’ve fully repaid your debt to the lender.
    • Bond Cancellation: At this point, the lender will cancel the bond registered against your property. This means that the security interest created by the bond is removed.
    • Title Deed Return: The lender will return the title deed to you. This restores your full ownership of the property.

    Key Points:

    • Security Interest: The bond creates a security interest in your property, giving the lender the right to take possession if you default.
    • Title Deed Transfer: The title deed is typically transferred to the lender as security.
    • Repayment and Cancellation: Once the loan is repaid, the bond is canceled, and the title deed is returned.

    FAQs

    Can you assist private individuals?

    No, we can only provide loans against property for legal entities

    Are there any upfront fees?

    No. All costs are deducted from the loan granted.

    How much do I get out?

    The amount left after the initiation fee, attorney costs and bond registration fee, are deducted from the amount granted and paid to the applicant.

    What are my repayment options?

    Option 1: Interest only for 12 months, then the full capital amount paid within 12 months
    Option 2: Interest and Capital repayments, then balance of capital paid at the end of 12 months

    Can I stay on in my home/property?

    Yes, you can typically stay in your home/property during the loan term. The lender’s primary interest is in ensuring that the loan is repaid. As long as you continue to make your loan payments as agreed upon, you should be able to remain in your home.

    However, it’s important to note that if you default on the loan, the lender may have the right to take possession of the property and sell it to recover their funds. To avoid this, it’s crucial to make your loan payments on time and communicate with your lender if you encounter financial difficulties.

    Can I rent my home/property out during the loan term?

    Generally, yes, you can rent out your home or property while it’s secured by a loan. However, there are a few things to consider:

    1. Loan Terms: Your loan agreement may have specific provisions regarding renting out the property. Some lenders may require your written consent or have additional requirements in place.
    2. Insurance: You’ll need to ensure that your property insurance covers rental income and any potential liabilities associated with renting out the property.
    3. Rental Income: In some cases, your lender may require you to use a portion of the rental income to make your loan payments.
    4. Tenant Screening: It’s important to screen tenants carefully to minimize the risk of property damage or non-payment of rent.
    Can I settle my loan early?

    Yes, you can typically settle your loan early. However, there are a few things to consider:

    • Prepayment Penalties: Some lenders may charge a prepayment penalty if you pay off the loan balance in full before the scheduled maturity date. This penalty is usually a percentage of the remaining loan balance.
    • Loan Terms: Your loan agreement will outline the specific terms related to early repayment, including any penalties or restrictions.
    • Benefits: While prepayment penalties may apply, there are several benefits to paying off your loan early:
      • Saving on Interest: You’ll pay less interest overall.
      • Improving Your Credit Score: Early repayment can positively impact your credit score.
      • Financial Flexibility: You’ll free up your monthly budget by no longer having to make loan payments.

    If you’re considering early repayment, it’s important to:

    • Review Your Loan Agreement: Understand the specific terms related to prepayment.
    • Calculate the Savings: Determine how much you’ll save in interest by paying off the loan early.
    • Consider Any Penalties: If a prepayment penalty applies, weigh the cost against the potential benefits.
    • Contact Your Lender: Discuss your options and get clarification on any questions you may have.
    Does the property stay registered in my name?

    Yes. A bond is registered over the property to secure the loan but the property stays in your name.

    THE BELOW FORM ONLY APPLIES TO LOANS AGAINST BOND-FREE PROPERTY. PLEASE ONLY SUBMIT THE FORM ONCE AND CHECK YOUR INBOX FOR A CONFIRMATION EMAIL.