Once your home loan is fully paid, you may have the option of keeping the loan 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.
If you prefer to cancel your home loan, the process is as follows:
You give the bank (or the cancellation attorney, who advises and is chosen by the bank) a written request to cancel your home loan. Check with your bank if there are penalty fees or administration costs when you settle your bond early.
The bank instructs the cancellation attorney to attend to the cancellation, giving the attorney the exact cancellation figure, which includes:
The settlement figure;
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. (NB! The bank normally over states the amount due and on cancellation they will refund you the surplus.)
If you have paid off your home loan you are entitled to request your title deed for your property from the bank on cancellation.
If you sold the property, the bank will give the title deed to the conveyancing attorneys. They will then register the buyer as the new owner of the property.
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 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.
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.
What Happens to the Home Loan of a Deceased Family Member?
In the event of the death of a family member, it is essential that you contact the deceased borrower's bank immediately and notify them of the death.
The 3-month notice period does not apply to a deceased estate. It is also important that instalments are still paid during the time that elapses between the death and an executor being appointed. The bond must still be serviced during this time because interest will still continue to accrue.
This article originally appeared in Property Power 11th Edition Magazine. To order your copy at the discounted price of R120 click here