In simple terms, a bond is a loan for which your house functions as the collateral.
How do mortgage bonds work?
When a lending institution lends you, the potential home buyer, money to purchase a property, the actual house is used as a form of security in the event that the repayments are not made.
The home buyer is required to pay back the home loan with interest over a period of time, usually running from 20 to 30 years.
The instalments will vary at times depending on the interest rate fluctuations.
The first few bond repayments made will cover the interest and fees occurred from the sale of property; later instalments will then go towards paying off the capital amount of the loan.
If you fail to pay back the loan, the Bank will take possession of the home and it will go through a process known as foreclosure.
