You have negotiated a mortgage that best suits your needs at the most favorable terms and conditions. The following must occur to complete the mortgage transaction:
Letter of Commitment
The Bank will consider your application and will provide you with a letter of approval by way of a loan agreement. This agreement outlines the sum of money which will be granted to you under a mortgage agreement and stipulates the terms and conditions of the mortgage. You will be asked to sign the loan agreement having agreed to the terms and conditions. Loan agreements are fairly standard in their content. The only significant differences that will affect your decision-making are the terms and conditions relating to penalties applied for early repayment of the mortgage, money sum payments and level of closing fee.
Some financial institutions may charge a penalty, ranging from three to six months’ interest, for the early repayment of a mortgage. The Home Mortgage Bank provides mortgage loans with no prepayment penalties,the ability to make lump sum payments, no processing fees and no mortgage indemnity premiums.
Completion Certificate (for construction only)
Upon the completion of construction, you are required to apply to the Local Government Authority for a Completion Certificate. This certificate certifies that the house was completed to the construction standards that were approved in the initial application to the Local Authority. You are advised to submit your application for the Completion Certificate early in order to avoid delays.
Fire Insurance Policy
Once the mortgage is approved, you will be required to obtain comprehensive all risk insurance coverage on the property purchased or built for the amount recommended by the Valuer. The insurance has to be effected just prior to completion of the mortgage agreement.
The Bank will advise their attorney that a mortgage has been approved in your name. The Bank will instruct them to carry out the necessary searches and prepare the necessary documentation to complete the mortgage transaction.
The Attorney will carry out a search in the land registry in the red house to determine that your prospective home is free from all encumbrances, i.e. that the property has good and transferable title. They will also require you to provide up to date receipts of payments of WASA rates, lease rent (where applicable) and land & building taxes. These can be obtained from the seller or, depending on the terms and conditions of your purchase agreement, you may have to pay the outstanding amounts.
Preparation of Legal Documents
Once they determine that the property is transferable, the attorneys will prepare the necessary legal documentation.
A Deed of Conveyance
A deed of conveyance is prepared transferring ownership from the previous owners to you. Once execution of all legal documentation is complete, the mortgage transaction is effectively closed. Your mortgage agreement with the mortgage company is then in place. At this time you will be required to pay the attorney for his services as well as pay him the stamp duty (if any) that applies to the deed of conveyance and deed of mortgage. The attorney will then register the two legal documents and pay the necessary duties. Once the registration is complete, you will be provided with completed copies of the documents for your records.
Disbursement of Funds
The attorney will advise the bank that the property has good and transferable title and that the documents are prepared. The bank will then issue a cheque to them for the mortgage amount for disbursement. Interest charges start to accrue from the date of disbursement of the mortgage funds by the bank. Your mortgage will be amortized from the first month following the execution of legal documentation.