Buying or selling a portion of a property, and the pitfalls

MDW Attorneys' Meyer de Waal explains the implications of investing in part of a property, especially in terms of bank loans.

The concept of co-ownership is well-known to those interested in property, but what is the case if you want to buy or sell only a portion of a property?

Director at MDW Attorneys, Meyer de Waal says this is not common, but certainly possible.

What one needs to understand is the the concept of co-habitation - yes, you can sell 10%, 40%, 50% of your property to another person.

Meyer de Waal, Director - MDW Attorneys

But there is one snag to keep in mind, he cautions.

The situation is that if you go to a bank for a mortgage, the bank will not mortgage only 25 or 40% of what you purchased. The bank will mortgage the entire property, because they say that if we have as a bank a 40% bond over a property, what happens if we have to sell the property?

Meyer de Waal, Director - MDW Attorneys

De Waal explains that if the current owner of the property already has an existing bond, that has to be settled before a new bond is applied for jointly.

This means that, if at some stage your partner cannot pay their share of the bond, the bank can sell the entire property.

It comes back to the concept of co-habitation. Both parties will have to go to the bank and apply for a mortgage.

Meyer de Waal, Director - MDW Attorneys

No bank will give you a split bond.

Meyer de Waal, Director - MDW Attorneys

The paperwork is very important says de Waal, with the agreement covering all eventualities.

This means, for instance, also updating your will to specify who your portion of the property goes to in the case of death

For more on the ins and outs of part-ownership, listen below: