It's no use blaming the bank's inspectors if the house you have just bought turns out to have structural defects, the Banking Ombudsman says.
Nearly one in five complaints dealt with by the ombudsman in the past year involved mortgage bond problems of one sort or another, and misunderstandings about the role of the bank's inspectors were one cause.
The ombudsman, Charl Cilliers, says in his report that home buyers often blame the bank when defects appear which they think the bank's inspectors should have spotted before the loan was granted. Because they have paid a fee for the inspection, the buyers tend to think their house has been given a clean bill of health.
But the banks' response is that the only purpose of the inspection is to ensure that the house provides sufficient security for the loan.
"We believe that the banks should, as an invariable practice, draw the borrower's attention to the fact that their inspectors are assessors only, that they do not carry out a thorough inspection of the property and that the bank cannot be held responsible if defects appear later.
"A notice to this effect should be addressed to borrowers or should be highlighted in bold type in the documents signed by borrowers and stressed in any discussion leading up to the grant of a loan," Cilliers says.
He also makes a distinction between a completed house and one which is being built. The bank's assessors cannot be expected to examine all the wiring, foundations, plumbing and roof of a completed house but if a loan is granted on a house under construction after the assessor has visited the building site, the borrower can't be blamed for thinking that each stage of construction has been checked and approved by the assessor.
Other complaints on mortgage bonds concerned:
* High interest rates
There is nothing the ombudsman's office can do about interest rate increases, Cilliers says: these are commercial decisions taken by banks and the ombudsman will only intervene if the increase was unfairly administered or if the bank charges you a higher interest rate than you have agreed to.
* Life Insurance
The ombudsman received complaints about banks which promised to arrange life insurance to cover the mortgage bond if the borrower died, but failed to do so and this only came to light after the borrower's death. His advice to you is to make sure your agreement with the bank is recorded in writing and that the instructions you give the bank are confirmed.
* Home insurance
Complaints were also made about banks which insisted that the property be insured by an insurer connected to the bank or chosen by the bank. If the bond agreement clearly states that the bank can nominate the insurer, there is nothing the ombudsman can do about this, Cilliers says.
* Repossessions
If the bank repossesses your house because you have defaulted on your home loan instalments, and sells the house for less than the amount outstanding on your bond, you still owe the bank money even though the house has been sold.