Cancelling a bond is an inevitable part of homeownership, but you\u2019re not alone if you have no idea what that process entails.<\/p>\n
Leonard Kondowe, National Admin Hub Manager for Rawson Finance, walks us through the steps to follow, and shares his tips on minimising costs and penalties along the way.<\/p>\n
Step 1: Submit your notice of intent to cancel<\/strong><\/p>\n Unless your bond has reached the end of its term (normally 20 or 30 years), you\u2019re going to need to provide at least 90 days written notice of your intent to cancel. Closing your bond before this notice period is up could incur penalty fees.<\/p>\n These are usually waived if the property is part of a deceased estate or has been sequestrated, or if you\u2019re taking out a new home loan with the same institution.<\/p>\n \u201cTo avoid early termination penalties, it\u2019s always best to give notice to your lender as soon as you put your home on the market,\u201d said Kondowe. \u201cYou can cover your bases even more thoroughly by including a clause in your sales contract that pauses registration \u2013 which triggers bond termination \u2013 until the conclusion of your 90-day notice period. That way, if you sell quickly and the transfer goes faster than normal, you won\u2019t end up having to foot an unexpected bill.\u201d<\/p>\n Kondowe warned that your notice of intention to cancel may expire if your property fails to sell quickly. In this case, you\u2019ll need to resubmit and start the process all over again.<\/p>\n \u201cExpiration dates vary by institution,\u201d he said. \u201cSome expire immediately at the end of their 90-day period, while others remain valid for as long as 6 months.\u201d<\/p>\n Step 2: Request cancellation figures<\/strong><\/p>\n Providing notice of intent to cancel a bond doesn\u2019t actually trigger the cancellation process. This only happens when your conveyancer (or cancellation attorney) is instructed to request your cancellation figures. This can happen at a time of your choice if you\u2019re closing your loan account of your own accord, or as soon as your property sells if it\u2019s on the market.<\/p>\n Step 3: Settle any outstanding amounts<\/strong><\/p>\n Your lender will provide cancellation (or settlement) figures to your conveyancer. These show exactly how much you\u2019ll need to pay to settle your remaining debt. If you\u2019re cancelling your bond without selling your property, you\u2019ll need to pay this out of pocket. If you are selling, this will be paid automatically from the proceeds of your sale as part of the transfer process.<\/p>\n \u201cRemember, lenders do charge interest on your outstanding balance from the date settlement figures are provided to the date the payment is received and the bond is officially cancelled,\u201d said Kondowe.<\/p>\n \u201cThis is unlikely to be much more than you would be paying on your bond anyway, so it shouldn\u2019t be an additional financial burden, but it could cause some confusion if the final settlement figure differs slightly from the original figure provided.\u201d<\/p>\n Step 4: Pay cancellation fees<\/strong><\/p>\n Lenders don\u2019t generally charge bond cancellation fees other than (avoidable) penalties for early termination. However, you will need to pay the cancellation attorney for their services, even if your bond was fully paid-up. These fees may be included in the settlement figure provided by your lender if they contracted the cancellation attorney on your behalf, said Rawson.<\/p>\n \u201cIt\u2019s important to be aware that this cost is not part of the transfer fees covered by the buyer,\u201d said Kondowe. \u201cBond cancellation fees are solely for the seller\u2019s \u2013 or bondholder\u2019s \u2013 account.\u201d<\/p>\n Cancelling a bond is an essential step in most property journeys, but it can feel overwhelming when you\u2019re doing it for the first time. Don\u2019t be afraid to ask for advice from your bond originator, who can help you streamline the process and minimise fees and penalties while sourcing new finance options for your next property adventure, the home finance expert said.<\/p>\n\n
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