What is a mortgage bond in Zimbabwe?

Whether one is thinking of building or buying a property, it is common to apply for a Mortgage bond in Zimbabwe Mortgage bond in Zimbabwe is an economic reality that most citizens who acquire immovable property are unable to afford to pay the cash price of such property due to the marked difference in property prices and the wealth, or lack thereof, of ordinary citizens. The mechanism, developed over many centuries, to assist the man in the street to acquire property is by way of a loan (home loan) from lenders, usually banks, who grant a loan to the home owner and then register a bond over the property purchased by the home owner. Bond finance is consequently an important socio-economic tool, which enables individuals to acquire a home. The corollary of this is the security given to lenders against the finance afforded to borrowers by way of mortgage bond. The lender or mortgagee becomes a secured creditor in the estate of the home owner.

Types of Mortgage bond in Zimbabwe

Mortgage bond in Zimbabwe means, a bond attested by the Registrar of Deeds specially hypothecating immovable property. A mortgage bond can only be registered against immovable property. The security on mortgage can only be obtained on hypothecating immovable property. The following are the different types of mortgage bonds that can be hypothecated:

1. General Mortgage Bond
2. Collateral Mortgage Bond
3. Surety Mortgage Bond
4. Indemnity Mortgage Bond
6. Participation Mortgage Bond

What is Hypothecating?

In terms of section 2 of the Deeds Registries Act [Chapter 20:05] a mortgage bond has to be attested by the Registrar of Dees specially hypothecating immovable property. This is essentially the creation of real rights capable of registration in the Deeds Registry.

Why Financial Institutions Require Mortgage Bonds?

The learned author Mhishi states that, the mortgage bond or the deed of hypothecation is the document which acknowledges indebtedness or obligations arising from various causes such as loan. It is a form of security in favour of a creditor. Rudden and Moseley in an Outline of the Law of Mortgages (Nokes) state that: “A man who lends money to another may be content to rely on the borrower’s promise to repay. That promise can be enforced by a civil action for debt. It is one thing, however, to go court and get judgment against the borrower; it is quire another thing to execute that judgment and recover the money lent. No matter how efficient the process for obtaining satisfaction, it will not work if the debtor has no assets; or, as more commonly happens, if the property he has is not of sufficient value to cover his debts in full. In such a case the ordinary “unsecured” creditors will not get all their money back, but will have to be content with that proportion of the loan which the debtor’s available resources bears to his liabilities.

Does the Financial Institution Own the Mortgage Property?

When a mortgage bond is registered, it does not change the owner. The borrower continues to hold ownership, and hence occupation. The basic rights which are created by a mortgage bond are that a lender is entitled to retain a hold over the secured property until the debt is paid, and if the borrower is in default, the lender is entitled to have the property sold and obtain payment of the debt out of the proceeds of the sale.

What is Required to Pass a Mortgage bond in Zimbabwe?

A Special Power of Attorney is required to grant authority to a Conveyancer to appear before the Registrar of Deeds to pass a Mortgage Bond. Without derogation from the generality of documents required, the following documents are also useful when applying for a Mortgage Bond:

1. Agreement of Sale
2. Mortgage Bond Application
3. Confirmation of Income (i.e. Proof of Income)
4. Copy of Title Deeds (or Proof of Survey if Title Dees Not Available)
6. Copy of National ID
7. X3 Colour Passport Sized Photos