“After nearly 20 years I’m finally at the point where I’ve just about repaid my home loan in full. This got me thinking though, what happens or what I should do when I pay the final instalment?”
We’re often approached by clients for advice on how to go about cancelling a paid-up bond, or even how the process of cancelling a bond unfolds after a property has been sold – so here are some answers!
The first thing to do after you pay your final instalment to the bank is to crack a bottle of champagne and to celebrate the fact that your home is now fully yours!
You now have options, and it must be noted that your home loan (or mortgage) will not automatically be cancelled just because you have paid the final instalment. Your choices are as follows:
1. Keep your home loan account with the bank open and the mortgage bond registered; or
2. Cancel the home loan account with the bank, and cancel the mortgage bond at the Deeds Office.
Many people choose to keep their home loan accounts open as they can still continue to use and draw from their flexi-account facility linked to their home loan. The advantage of keeping your home loan account open is that you will not have to incur further costs to register another bond over the property as security should you wish to take a further loan from the bank, for example to fund home improvements.
You will of course still need to pay the monthly administration costs to the bank and your insurance policy and, of course, if you borrow more money, you will need to repay the new loan monthly. Also note that the bank will keep the title deed to your house as security until the mortgage bond is cancelled.
If you would rather part ways with the bank and cancel your home loan account and mortgage bond, the following steps should be followed:
Firstly, you must give the bank written notice of your intention to cancel the home loan. Usually a period of 90 days is required, to avoid penalties but if your home loan is paid up this would not apply. The bank will then send instructions to their cancellation attorney to assist them with cancelling the mortgage bond at the Deeds Office. If you fail to notify the bank within the above-mentioned three-month period of the cancellation of your home loan, additional charges could be added to your settlement statement.
Secondly, the cancellation attorney will provide you with a settlement statement containing your cancellation figures. In case of early termination, an early termination penalty may also be added to the cancellation figures. Once the cancellation figures are paid, the cancellation attorney lodges a consent to cancel your mortgage bond at the Deeds Office. On date of registration at the Deeds Office, your mortgage bond is officially cancelled and the home loan account with the bank is closed.
You will then receive the title deed to your home from the cancellation attorney. This title deed reflects your ownership of your property and should be carefully stored. If lost, it can be an expensive and time consuming exercise to replace the title deed – CLICK TO VIEW Title Deed Procedure.
As cancelling your home loan may also mean you are cancelling your home insurance with the bank, it is important to ensure that you take out the necessary insurance cover for your home, or maintain cover that is already in place.
If you are unsure about the pros and cons of cancelling your home loan, consider talking to one of our attorneys or your banker for more information about the options available to you.