Cancelling your bond: What you need to know
Paying off and cancelling a home loan is often viewed as a significant goal being achieved, but there are a number of aspects to consider.
Not least of which is whether cancelling the bond is, in fact, the right decision.
The reasons behind a bond cancellation
There are several reasons that might result in an individual cancelling a bond.
The first of these is when the full loan amount has been paid back to the lending institution. Should the finance no longer be required, the individual may decide to cancel the loan account, and subsequently the bond.
Cancelling a bond also frequently takes place at the point of a property transfer. Once the seller has sold the property, the proceeds will be used to pay off the outstanding loan amount and the bond against the property will be cancelled.
In addition, in some cases an individual will choose to cancel a home loan with a particular institution in order to accept an alternative loan offer, perhaps at a lower interest rate.
Setting the cancellation process in motion
The first step in cancelling a bond is informing the lending institution of the intention to do so, and even if this is done telephonically through the call centre, it is often also advisable to submit written notice via email to ensure there is proof of the date this notice was supplied. The most efficient way to do this will be to instruct a conveyancer servicing on the specific bank’s cancellation panel to make the request using the channels established for that specific purpose. Once the bank receives the request, it will issue an instruction to one of their panel attorneys to cancel the bond (not necessarily being the same conveyancer that requested the figure).
While the requirements differ from institution to institution, typically there is a 90-day notice period required in order to cancel a bond if the bond was taken out within a 3-year period prior to the request. Should this not be adhered to, there may be cancellation penalty fees charged. Notice can either be provided by the property owner, or in the case of a property transfer, by the attorneys appointed to attend to the matter.
In the case of a transfer of the property, the bank will issue cancellation figures to the transfer attorney who requested these, and appoint / instruct a cancellation attorney, including guarantee requirements as a means of ensuring the conditions of the loan are met.
The bank will then issue a cancellation instruction to the transfer attorney, and appoint a cancellation attorney. In addition, guarantee requirements will be sent as a means of ensuring the conditions of the loan are met.
A conveyancing attorney is required for this process as the bond cancellation must be registered at the Deeds Office against the title deed of the property.
When cancelling a bond is not the right move
While there are many valid reasons, and potential benefits, to cancelling a bond – such as eliminating service fees or receiving the title deed to your property – making the decision to do so is not always as clear as it seems.
In fact, there are potential benefits to maintaining a home loan. For example, such a loan provides convenient access to significant finance should this be needed – this can be particularly useful for things such as property renovations which require a large financial outlay.
As such, the pros and cons of cancelling a bond should be considered in the context of your particular situation before making the final decision.
Written by Wessel de Kock
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