Once your home loan is fully paid, you may have the option of keeping the bond facility available to you. This is important if you need to borrow more money in future. You will not have to incur bond registration costs again in the future (on the same property in question), as you will not need to register a further bond over the property. You may also keep your Homeowner's Insurance and Life Assurance Policies. You will obviously still have a small monthly payment to make, i.e. Administration Fee, Homeowner's Insurance and Life Assurance.
The process:
You give the bank (or the cancellation attorney, who advises and is chosen by the bank) a written request to cancel your home loan. The bank will require that you give a 90 Day (3 month) Early Settlement Notice. If you do not comply with this notice period, you may need to pay a finance charge. The only instances where the notice period may be waived are in the case of:
- A deceased estate;
- A sequestrated estate;
- Bonds where you can provide evidence that your new bond will be with that same bank.
The bank instructs the cancellation attorney to tend to the cancellation, giving the attorney the exact cancellation figure, which includes:
- The month-end balance prior to cancellation figures being issued;
- 90 Days interest.
- The homeowner's insurance premiums that would have been debited to the bond account in the next 6 months, to ensure that the property is covered until transfer takes place.
- The life assurance premiums that would have been debited to the bond account in the next 6 months, to ensure that you are covered until transfer takes place.
- All the legal costs, interest and/or early settlement charges.
The bank furnishes the buyer's bank (who now holds the new bond) with the title deed, once the bond is paid up after cancellation.
A guarantee (promise) is issued, by the registering attorney to your bank, that there are sufficient funds available to cover the bond on the date of cancellation.
The bank issues the consent to cancellation.
If the bank receives more than the amount needed to repay your home loan, it will refund you.
Early Settlement...
If you cancel the home loan, once paid in full, the bank must give you the property's Title Deed it holds as well as any other security documentation. Remember that you will pay a 'Bond Cancellation Fee' to the attorneys to cancel your home loan. Click here to read more about Title Deeds.
If you cancel the home loan, due to the sale of your property, while still owing on the bond, you have to notify the bank in writing at least 90 days (3 months) in advance. You will also need to stipulate to the bank how you intend to repay the outstanding amount, i.e. with the proceeds from the sale of your home. If you need to cancel the bond with less than the 3 months notice, you may be liable for finance charges. Some banks may waiver the 3-month notice period if you refinance your new property with them. For more information on this, contact your banker/financial adviser.
