If you want to purchase property, whether for a business or home, you do so by taking out a bond. A bond is more commonly referred to as mortgage. It’s rare that an individual will have ample enough funds to purchase a property straight-up. So the individual must borrow from the bank.

Banks are in business to lend money, so bonds have always represented a primary service they offer. Holding a mortgage is a way the bank will make a long term profit, because they not only receive money from the individual but also hold the deeds to the property until the loan is repaid in full.

If you are interested in taking out a mortgage, you first must be able to make a down payment, commonly known as a deposit. This deposit usually should equal at least 30% of the net worth of the property. This down payment ensures the bank that you plan to pay off the debt and have the necessary funds to begin with.

The current mortgage crisis has resulted from banks, especially in the United States, becoming too lenient in who they offer mortgages too. In fact, sometimes banks allowed people to take out mortgages with little down. They are now paying the price, and as a result, must only offer new mortgages with a high down payment.

The bank must remove itself from a large risk, so the direct deposit is necessary. The deposit allows banks somewhat of a chance to recover damages in case the borrower drops out of the picture.

Bonds are intended for the long-term, with a minimum of ten years required, and generally running more in the twenty to thirty year period. People who apply for mortgages for the first time must display a steady employment and pasty financial stability for at least a few years.

The bank also tends to frown upon second bonds that are intended to help release some capital on the property to a struggling business or to support your own, especially if you are looking to start the business from scratch.

Owning a property is a responsibility and benefit every individual should experience. However, taking out a bond is serious matter and one that demands a lot of examination beforehand.

Graham McKenzie is the content syndication manager at BondCredit.co.za South Africans leading Bond Originator