Understanding the bond cancellation process
Settling your home loan does not mean that your bond gets cancelled automatically.
From the moment you get approval for your home loan, you’ll be counting down the days until you can make that final payment. However, cancelling a bond on a property is not as easy as ending a streaming subscription – simply paying your final home loan instalment doesn’t automatically cancel your bond. There is still a cancellation process that you must follow.
The difference between settling your account and bond cancellation
- Settling your account
When you settle your home loan, you’re paying off the total amount owed according to your loan agreement with the bank. This includes the loan amount and interest. The bond remains in effect until further cancellation steps are taken. You can settle your home loan while keeping your account active – so that you keep access to the account benefits like NedRevolve, if applicable, or the ability to apply for further loans. However, you’ll continue to pay monthly fees and insurance premiums, and the bank will retain your home’s title deed.
- Bond cancellation
This process formally closes your home loan account and cancels the mortgage bond – so you will no longer have access to facilities like NedRevolve. An attorney will oversee the bond cancellation, which typically takes up to 2 months. Once the bond’s been cancelled, you will incur no further fees or costs, and you will receive the title deed to your home.
Take the following steps to cancel your bond
- Request bond cancellation through the Money app or Online Banking, or by calling 0800 555 111.
- Transfer any life assurance and homeowner’s insurance premium payments from your home loan instalment to your transactional account.
- An attorney will manage the cancellation process with the deeds office.
- You’ll need to pay any applicable bond cancellation fees directly to the cancellation attorney. This bond cancellation fee could be higher if additional loans were taken during the loan term.
- Once cancellation is complete, your title deed will be sent to you, and your home loan account will be closed.
- Do not cancel or reverse your debit order before your bond has been cancelled, as unpaid fees or insurance premiums will cause delays in the bond cancellation process and may affect your credit score.
Bond cancellation is a necessity when selling your property or finalising your bond. It ensures the official termination of the home loan and the transfer of your title deed. Your account can be closed only once all amounts due are paid. Any refunds due to you will be paid out after cancellation.
You must also continue your building and home contents insurance after you cancel your bond
If you cancel your bond because you’ve sold your house and not because you’ve paid off your home loan, you must also remember to contact your local municipality to close your utility accounts at your former address.
Bond cancellation fees and penalties
National Credit Act regulations stipulate that the lender can charge a cancellation fee if you cancel your bond before the end of the loan period. According to section 125 of the National Credit Act, if you want to cancel your bond, you need to give your bank at least 90 days’ notice. Otherwise, you might face a penalty charge equal to 90 days’ interest on the remaining loan amount.
Once you inform the bank, the penalty period kicks in, lasting for 90 days from the day that your notice is received. During this time, the penalty amount gradually decreases until the 90-day period ends.
However, if you let the bank know about your plans more than 90 days before you cancel the bond at the deeds office, you won’t face any early-termination charges. Give your lender enough notice, and you can avoid unnecessary fees.
Insure against worst-case scenarios
Securing the future of your home is crucial for your family’s well-being. A Home Loan Credit Life policy can cover up to R2.5 million of your home loan if you pass away or become disabled and unable to work. It also provides benefits like emergency household repairs, legal services, medical cover for trauma, assault and HIV support, and access to a personal health advisor.
Credit life insurance is a responsible choice, because if anything were to happen to you, it would help your loved ones pay off your home loan, cancel the bond and receive the title deeds to the home you’ve left them.
You must also continue your building and home contents insurance after you cancel your bond. You can contact Nedbank Insurance on 0860 111 333 for a quote or to transfer your insurance premium payments to your transactional account. This will give you peace of mind, knowing that your home is covered.
