In certain cases, if you have paid off your home loan you may have the option to keep the bond account open, which will keep the loan facility available. The reason you would want to keep the facility open is to ensure that you have access to money if needed for household improvements or repairs.
The advantage of keeping the account open is that you will not need to register another bond over the property and incur more registration costs. All you will have to pay is a monthly payment that covers the administration of the account and the insurance policies, which means being able to keep the Homeowner’s Insurance and Life Assurance policies.
If you decide that you would rather cancel the home loan account, there are a few procedures that you will need to follow, as it will not happen automatically. You will need to provide the bank with a written request asking for the home loan account to be cancelled. In the instance that the bond has been settled early, there might be a penalty or administration fee that will need to be paid to cancel the bond.
When the bank has received the request to cancel the account, they will instruct the cancellation attorney to attend to the cancellation and provide a cancellation figure. The cancellation figure will consist of the bond settlement figure and approximately six months of Homeowner’s and Life Insurance premiums, to ensure that you are covered until the transfer takes place.
Once the bond has been settled, you are entitled to request that the bank provides you with the title deed to the property upon cancellation, along with any other security documentation. If the settlement of the bond is due to the property being sold, then the bank will give the title deed to the conveyancing attorney, who will then register the buyer as the new owner of the property. A guarantee will be issued by the registering attorney to the bank, ensuring them that there is enough money to cover the bond on the date of cancellation. The bank will then issue consent to the cancellation.
If the property has been sold and money is owed to the bank, the bank will need to be notified at least three months in advance. You will also need to stipulate how you intend to pay the outstanding, for example, with the proceeds of the sale of the property. Failing to notify the bank of the cancellation within the stipulated minimum three-month period could result in additional finance charges. If you are selling one property and refinancing a new property, the bank may decide to waive the notice period.
If the bondholder passes away, the bank will need to be notified of the death as soon as possible. In the case of a deceased estate, the three month notice period does not apply. However, the bank will need to know to make the necessary arrangements. During the period between the death and appointment of an executor of the estate, the bond will need to continue being paid as interest will accrue on the account.
If you are not sure of anything regarding the bond cancellation process, it is best to consult with your bank or financial adviser who can shed further light on the subject.
