As average house prices for first-time buyers hit a record high of just over R1.4 million, applying for a joint bond with one or more people has become a popular home-buying strategy. Driven by young professionals pooling their incomes, romantic partners investing in their future, and extended families seeking financial relief and long-term security, joint bonds enable the expansion of purchasing power in a competitive property landscape.
Lower deposit burden, higher buying power
A joint bond is taken out by two or more people, often partners, spouses, friends or family members, allowing the applicants’ financial profiles to be considered collectively. As all the applicants’ incomes and credit profiles are considered as part of the application, the approved bond amount is usually higher than if one person applied alone. Pooling incomes and financial resources effectively lowers the individual deposit burden and makes it possible to consider a larger bond or a home in a higher price bracket.
From a lender’s perspective, joint applications provide multiple income streams to support affordability. Bond originators use the group’s combined financial information when submitting applications to various banks and comparing the offers available to the applicants. However, the reverse is also true. If one applicant carries a poor credit history or high debt levels, it could affect the collective application or result in higher interest rates.
The legal reality
While buying as a collective eases the financial load, it does not lessen the joint responsibility of each applicant. As the bond is in each person’s name, all applicants share responsibility for ensuring that the debt is repaid. This means that if one person defaults because their financial situation changes or for another reason, the other parties are liable for the full debt.
Banks do not split the debt into portions according to the number of people whose names are on the bond. Instead, the group is viewed as a single entity, and each person is wholly responsible for settling the remaining balance. Irrespective of how many people have applied for a bond together, it is imperative to have a clear contract or legal agreement in place. Up to 12 people can apply for a bond together.
Structuring the co-ownership agreement
Joint liability and ownership are not necessarily the same thing, and a joint bond agreement should distinguish between ownership and liability. Ownership may not necessarily be split equally, especially if someone has contributed more to the deposit or to the buying costs. The title deed will reflect each owner’s individual ownership share, and this will also influence how the profits of a future sale should be split.
Ownership should not be confused with liability. The parties buying together remain collectively responsible for repaying the bond. An agreement can set out each person’s financial contribution, how bond repayments and other property costs will be shared, how decisions about the property will be made, and who will be responsible for managing it. Trust and financial transparency are important when buying a home with two or more people.
Determine an exit strategy
Although it can be an uncomfortable conversation, parties also need to discuss their exit strategy and agree upfront what will happen if someone wants out, whether that involves a buyout, a sale of the property, or another agreed arrangement. Having this agreement drawn up by an attorney or conveyancer will help prevent disputes later.
If the ownership arrangement changes and the departing person needs to be released from the bond, usually following a divorce or death of a spouse, the other owner can apply to the bank for a substitution of debtor. This means that the bank reassesses the remaining owner to ensure they can afford the bond on their own before releasing the departing person from liability.
Navigating the application
Pre-approval encourages financial transparency about each party’s debts, income, and credit scores, ensuring the group has realistic expectations. The best time to address these issues is before the group even starts house hunting. Setting up a dedicated joint bank account specifically for home expenses further streamlines monthly repayments and ensures full visibility for all parties involved.
As affordability increasingly places pressure on buyers, especially those entering the property market for the first time, joint bonds offer a practical way for aspiring homeowners to combine their resources and boost their buying power.
However, buyers should approach a joint bond with the same care as any other major financial commitment. By being transparent about their finances, formalising their agreement and planning for the possibility that circumstances may change, joint buyers can help ensure that the shared risk of a joint bond becomes a shared reward.
