James Bond has turned into an international icon for his bravery, quick wits, and dangerous actions. While every man wants to be James Bond in one way or another, it's important to not share the same approach when dealing with bonds, although they take after the same name.
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 that high.
Several fees are associated with bonds, which include registration, initiation, and conveyance fees. Value added tax also comes into the picture. Add up all these charges and you begin in some debt.
The fees must be paid, but they should never exceed 3% of the total cost of the property. In return, the property should appreciate, and recover the lost in a year or two.
However many people do not consider the minor details and purchase property on instinct. If they sell back within five years they lose a lot of money because you spend the first third of the bond paying back interest and not principal. The result is a lot of money still due.
For example, if I was to sell my house after five years, I would only pay $30,000 out of a total of a $600,000 bond; I would still owe $570,000 plus interest. Not a good investment at all. Never sell early unless the owner stands to make a considerable profit that justifies the short term loss.
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. - 15224
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 that high.
Several fees are associated with bonds, which include registration, initiation, and conveyance fees. Value added tax also comes into the picture. Add up all these charges and you begin in some debt.
The fees must be paid, but they should never exceed 3% of the total cost of the property. In return, the property should appreciate, and recover the lost in a year or two.
However many people do not consider the minor details and purchase property on instinct. If they sell back within five years they lose a lot of money because you spend the first third of the bond paying back interest and not principal. The result is a lot of money still due.
For example, if I was to sell my house after five years, I would only pay $30,000 out of a total of a $600,000 bond; I would still owe $570,000 plus interest. Not a good investment at all. Never sell early unless the owner stands to make a considerable profit that justifies the short term loss.
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. - 15224
About the Author:
Graham McKenzie is the content syndication manager at BondCredit.co.za South Africans leading Bond Originator
