Denise Simpson discusses the changes in bank charges for home loans applied for after the National Credit Act came into effect in June this year.
Prior to the National Credit Act (NCA) which came into effect on 1st June 2007, all banks charged an Assessment Fee. This fee equated to about 0.2% plus vat on the value of the property. Banks also used to charge an Initiation Fee of R199.50 inclusive of vat for bonds up to R500 000 and R350 for bonds over that amount. This was a once-off fee, but if clients re-registered further monies against the bond, both fees were then charged again.
The fee structure has changed since the NCA came into effect, with both the Assessment Fee and the Initiation Fee falling away. However, the banks still charge a monthly admin fee, which varies from bank to bank.
With the National Credit Act now in force, all fees that the banks charge have been regulated:
The Property Valuation Fee is no longer applied, but has been replaced by the once-off Initiation Fee with the maximum to be charged being R5985 inclusive of vat (0.684%), depending on the size of the loan.
The monthly Administration Fee has been increased to R28.50, but if the client decides not to use the Bank House Owner Insurance, this fee can almost double. In the past, it was mandatory to take the bank's insurance and it is still wise to do this as the premium is debited annually, divided by 12 and added into the bond repayment. This way the policy will never lapse and the home is covered for any unfortunate eventuality. The fee is normally market-related.
Early Settlement Interest still remains i.e. if you are going to cancel your bond prior to the completion of the term of the bond (usually 20 years) and have not given 3 months notice, the bank is entitled to charge this fee, in terms of the National Credit Act.
To avoid early settlement interest being charged, it pays to advise the bank well in advance that the home bonded to them is going to be sold. If this is not done, the bank will take the notice period from the date they receive the cancellation figures from the conveyancer handling the transfer.
If you go back to the same bank you used initially, within a prescribed time, and re-apply for a new bond for a new property, this interest rate charge can be waived or refunded pro-rata.