'We are,' says Rob Lawrence, national manager of Rawson Finance, the mortgage origination division of the Rawson Group, 'in an era where it is increasingly difficult for people (especially young people who are not earning large salaries) to get bonds '“ but there are ways in which this can be achieved'
One of the most popular, he says, is to use a suretyship in which another individual (often a parent, sibling or co-habitee) stands surety for the bond and agrees to be responsible for it if the buyer falls behind on his or her monthly payments.
In theory, says Lawrence, this provides a 100% guarantee '“ but in practice, the banks have found that there can be more difficulties and delays in collecting a suretyship debt than a conventional mortgage debt.
This, says Lawrence, has led to their now insisting that the guarantors sign on as co-owners of the property.
With this system, should the mortgage bond payments fall behind, the co-owner becomes liable for the whole debt. Very few properties financed in this way, says Lawrence, have had to be repossessed.
However, those contemplating purchasing property by this method have to recognise that ancillary issues must be taken care of.
The first is what happens if one of the co-owners dies?
In that circumstance, says Lawrence, the property will automatically go into his deceased estate and be dealt with as part of it, in line with the instructions in the will '“ and estates can take months or years to wind up.
If a co-owner dies intestate (without a will), the situation becomes even more complex and reaching a solution will take even longer.
It is therefore essential, says Lawrence, that the co-owners each draw up a will in which it is spelt out that, on the death of one partner, how the property must be dealt with.
It is also highly recommended that both partners take out an insurance policy on each others lives to cover their share of the mortgage bond. This will prevent the surviving partner now having to repay the whole bond, rather than just the portion he has paid so far.
In addition, advises Lawrence, it is wise to draw up a civil agreement in which it is clearly stated what must happen should the partners want or need to dissolve the partnership. All too often, he says, amicable arrangements can turn sour and a split becomes necessary. Quite often, too, one partner will emigrate, retire or have some other reason for no longer being involved.
'Co-ownership is a good way to get into the property market, or to increase your stake in it, and will undoubtedly help many to capitalise on property in the next decade,' said Lawrence. 'Right now would be a good time to buy because, in the residential sector, the cards are still stacked in the buyers favour'
For further information contact Rob Lawrence on 021 658 7100 or email rob@rawsonfinance.co.za.
