Bond, Bankrupt Bond: The costs associated with bonds
Buying property is always a questionable decision. For starters, land is becoming harder and harder to purchase. There are also the questions of "what will you do with it?" and "do I really need it?" Buying property can come in the form of a bond, which will finance the property for the long-term.
People who buy and sell property within five years lose money. It's an alarming statistic. The main reason is costs associated with buying property derive from a home loan or bond. These loans or bonds are designed for the long-term and not short-term, so when they are sold back quickly, the losses are heavy.
The actual costs of taking out a bond in relation to the total costs involved in the act of buying a property are not high.
Registration, initiation, and conveyance fees serve as bond charges you can expect to pay. They join value added tax as the principal bond fees.
However these fees, which are predicted to reach around 3% of the total property cost, are recovered within a year or two assuming your property appreciates.
Understand that bonds are top-heavy. By this I mean that when you take out a long term bond, the first third of the bond's duration is directed towards interest and not principal. So, when you sell back property quickly, you lose a lot and still owe a ton of principal.
When you sell the property within five years you may be staggered to learn that you still owe hundreds of thousands of dollars. The reason is you paid off a lot of interest but still owe a large portion of the principal. Only sell the property early if you figure to make a huge profit on the sell.
Like the client borrows from the bank, the small bank also borrows from the primary bank. If the bank falls into hardships, they may request some help from the central bank. The central bank can assist by only demanding principal and no interest for the time being. The central bank defines this as a "grace" period. However the sympathy does not come without justice. The bank still needs to recover the money and will issue penalties that can add up quick.
Costs associated with a bond are relatively low as long as the borrower takes a long term view of property ownership and is able to meet the commitments throughout the duration of the bond.
People who buy and sell property within five years lose money. It's an alarming statistic. The main reason is costs associated with buying property derive from a home loan or bond. These loans or bonds are designed for the long-term and not short-term, so when they are sold back quickly, the losses are heavy.
The actual costs of taking out a bond in relation to the total costs involved in the act of buying a property are not high.
Registration, initiation, and conveyance fees serve as bond charges you can expect to pay. They join value added tax as the principal bond fees.
However these fees, which are predicted to reach around 3% of the total property cost, are recovered within a year or two assuming your property appreciates.
Understand that bonds are top-heavy. By this I mean that when you take out a long term bond, the first third of the bond's duration is directed towards interest and not principal. So, when you sell back property quickly, you lose a lot and still owe a ton of principal.
When you sell the property within five years you may be staggered to learn that you still owe hundreds of thousands of dollars. The reason is you paid off a lot of interest but still owe a large portion of the principal. Only sell the property early if you figure to make a huge profit on the sell.
Like the client borrows from the bank, the small bank also borrows from the primary bank. If the bank falls into hardships, they may request some help from the central bank. The central bank can assist by only demanding principal and no interest for the time being. The central bank defines this as a "grace" period. However the sympathy does not come without justice. The bank still needs to recover the money and will issue penalties that can add up quick.
Costs associated with a bond are relatively low as long as the borrower takes a long term view of property ownership and is able to meet the commitments throughout the duration of the bond.
About the Author:
Graham McKenzie is the content syndication manager at BondCredit.co.za South Africans leading Bond Originator
posted by Debt Consolidation Loan at
6:51 AM
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