Bond Cancellation Process
Once your home loan is fully paid, you may have the option of keeping the bond facility open/available to you. This is important if you need to borrow money in the future. If you decide not to cancel your bond (even if it is paid up) you will not have to incur bond registration costs again when you decide to take up the facility again (this is obviously dependent on the rules and requirements of the financial institution). You may also keep your Homeowner’s Insurance and Credit 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 when you decide to cancel your bond:
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 (3month) early Settlement Notice. If you do not comply with this notice period, you may need to pay a finance charge (penalty interest).
The bank instructs the cancellation attorney to attend 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 (if applicable).
- The homeowner’s insurance premiums that would have been debited to the bond account in the next 6 months. (This is done to ensure that the property is insured until transfer takes place.)
- The credit life assurance premiums that would have been debited to the bond account in the next 6 months. (this is done to ensure your life remains assured 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 and after cancellation and registration of the new bond. A guarantee (promise) is issued, by the transferring/bond attorney to your bank, that there are sufficient funds available to cover the bond on the date of cancellation. If the bank receives more than the amount needed to repay your home loan, it will refund you a few days after registration.
If you cancel the home loan(without selling your property), once paid in full, the bank will 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 even if the balance is paid up in full(Bond cancellation costs).