Loan terminology explained
A Loan to Value Ratio means that your home loan amount is equal to the value of your property. There are instances where a bank will advance you a loan of more than 100% of the value of the property, for example 108%, so that transfer duties and the like are covered by your loan. It’s actually pretty straightforward.
A Readvance is when a portion of your home loan is repaid and you can borrow all or part of the repaid amount again. You don’t have to register another bond. Your property and financial stability will be re-assessed. A readvance comes in handy when you wish to renovate or improve your home. What you will have to provide the financial institution with in order to apply for a readvance: proof of permanent income, a quotation of the proposed renovations, or if applicable, approved building plans.
A second bond on your home is also referred to as a further loan. This is an additional loan registered on an existing home loan. To qualify for a second bond on your home, financial institutions will want to have proof that the value of your property has increased to at least the amount of your original loan plus your proposed further loan combined, and that you can afford the new repayment.
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