Bond cancellation fees and how to avoid paying them

The 90 days’ written notice only represents intent to settle. It does not mean that the bond will be cancelled 90 days from the date of that notification.

Article summary

• If you’re selling your home and want to cancel the bond, you must give 90 days’ notice.
• The banks will charge a penalty for early termination of the bond.
• There are exceptions to the rule.
• The bond will only be cancelled after a conveyancer requests the final figures from the bank.

Thinking of selling your home? You’ve probably got an existing bond that needs to be settled so remember that early settlement is likely to cost you a 90-day termination charge. The National Credit Act allows banks to process this fee if a seller gives notice of the intent to cancel their bond before the end of the conventional 20-year loan period.

If your bond is relatively new, and you want to cancel it within the first two years of the loan agreement, you will also be liable for penalty interest of approximately 1% of the amount owing. This penalty will be applied once the house is sold and deducted from the proceeds of the sale.

Cancellation figures

Don’t think that the 90 days’ written notice means automatic cancellation of the bond at the end of that period. It merely represents your intention to sell your property and cancel the home loan, and it’s best to do this before you put your home on the market. A new letter must be written to start the process again if the property does not sell within that time.

It’s important to know that the bond will only be cancelled after a conveyancer requests the final figures from the bank. That only happens after the property has been sold and the attorneys have received all documents required.

If the seller does not provide the required notice, the date the conveyancers request the final figures will be the one that marks the beginning of the notice period. The cancellation fee will then depend on the time taken to register transfer of the property.

The rules

• The 90-day notice period may be waived by the bank if a new property is purchased and another bond is taken out with the same financial institution.
• Penalties are not applied for sequestration.
• Penalties are not applied for deceased estates.
• Where loans are cancelled within the 90-day notice period, pro-rata interest is charged on the remaining days.
• The notice period does not expire if cancellation instructions have been issued to the conveyancers.
• ABSA’s validity period is 180 days, Nedbank’s is 12 months, Standard Bank’s is 90 days and First National Bank’s is six months.

The penalty can be waived or refunded as follows:

• If the bond is part of the ABSA Loyalty Campaign or the client gave notice and has proof thereof and it was not loaded;
• If a new bond is to be registered with Nedbank, amended cancellation figures are issued or, if the bond is already cancelled, the penalty is refunded;
• If a new bond is registered with Standard Bank within six months of the cancellation date of the old bond, then any notice interest charged may be refunded to the new loan account;
• First National Bank will not waive an early termination fee. It can be refunded by way of the MYHNYHL product.

South Africa’s leading bond originator offers a range of home loan calculators to help people looking to buy a home determine what they can afford. Click here to access ooba’s free, online prequalification tool, the ooba Bond Indicator. Then, when you’re ready, you can get prequalified or apply for a home loan with ooba.

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