Explaining Bond Cancellation Fees
In most of the cases where a homeowner is planning to sell his property, then he would still have a bond which needs to be cancelled with the bank or the bond originator. It will be the homeowner’s responsibility to pay and do the cancellation and the transfer of the property. In most cases homeowners are not aware of the fact that they should notify their banks if they are planning on selling their property. In this article I will explain how one can avoid the cancellation fees and how to go a bout to transfer the property in the correct manner.
According to legal advisors of South Africa, most of the financial institutes will give every seller a 90-day termination charge if they wish to sell the property prior to the settlement of the full bond. Banks have the right to do so according to the National Credit Act of South Africa.
If a homeowner decides to sell their property within the first 24 months of the bond, then they will be liable to pay 1% of the outstanding amount of the bond. For example; If you had a bond of R500 000, then you will be liable to pay R5000. It is important to know that these figures may vary depending on the term and conditions of the financial institution. It is also good to know that the seller will only be entitled to pay this fee once he has sold his property.
People should know that they have to pay this cancellation fee. You should consult with your real estate agent to make sure that they email, fax and write to the bank to inform them of the sale before the house is even mentioned to the open market.
There are very few cases where the cancellation fee does not have to be paid. These cases are: When you are selling your property to a deceases estate. The seller of the property has been sequestrated or if the seller is planning on obtaining a new loan from the same bank for another piece of property.
We have seen that sellers think that if they inform their bank 90 days before selling the property, then the bond will be cancelled with in 90 days. That is in fact not the case at all. That will just inform the bank of the intensions of you selling the property.
Your bond will only be cancelled if the bank has received all the cancellation figures from the lawyers and if the banks have received all the guarantees, and that the property has been sold to another party.
By understanding the bond cancellation fee won’t be confronted with more financial surprises. We now understand why we should inform our banks or bond originators of all actions that we want to take with our property.