By Angelique Ruzicka, editor, Justmoney.co.za
If you are like most home owners you’ve probably long since forgotten about the terms and conditions of the mortgage agreement you signed with your bank. However, if you are thinking of moving home or cancelling your home loan account then you will probably be in for a shock as there is usually a penalty payment that you will be forced to pay for the pleasure of doing so.
The majority of financial institutions will charge homeowners that want to sell their home or cancel their home loan account a 90-day early termination charge.
Justmoney approached Standard Bank, Absa, Nedbank and FNB and all confirmed that a 90 day notice period must be given if homeowners want to cancel their bond (selling a home will involve cancelling the bond attached to the property you are selling).
“Should clients wish to cancel their home loan or [if they] are in the process of selling their home, Nedbank’s policy requires clients to provide 90 days written notice period informing the bank of their intent,” explains Timothy Akinnusi, head of sales and customer value management for home loans, of Nedbank.
“Should clients fail to meet this requirement (90 days’ notice period); they will be liable to pay an early termination charge equal to no more than three months’ interest according to their loan agreement signed with the bank.
“If a home loan is cancelled before the notice period or if someone gives notice for less than 90 days, they will have to pay the interest over the remaining period. The 90 days’ notice will be valid for one year. If, for whatever reason, the loan is not cancelled within this time, clients will have to give notice again,” adds Akinnusi.
The early termination charge is not the only cost that home owners must face if they want to cancel their bond. Deeds Office charges and attorney fees also need to be accounted for.
“There is the normal flat rate of R1, 500 for the initial bond. If you take any additional loans during the lifetime of the bond there is another flat rate of R200 per bond. There are two other fees that the Deeds Office charges. There is a Deeds Office fee of R100 and an electronic generation fee from the Deeds Office of R100,” says Ewald Kellerman, head of customer interaction at Absa Home Loans.
“Once clients formally notify the bank of their intention to cancel the bond, a cancellation attorney will be appointed who will charge an average of between R2500 and R5000 for the cancellation of a bond, depending on the number of bonds registered over the property. Once the closure process is complete, the client will receive their title deed/s,” explains Monde Motha, channel manager at FNB Home Loans.
Room for negotiation
While paying the Deeds Office fees is inescapable, the good news is it is possible to negotiate with your bank about the 90 day termination charge. In this instance, being loyal could help. “If you are cancelling one bond and will take up another bond with the same institution you may be treated differently. Then the bank may waive it [the 90 day notice interest] unless you go to another financial institution for finance,” says Steven Barker, head of home loans at Standard Bank.
Kellerman confirmed Absa would also be open to negotiation. “If you agree to take the next bond out with the bank then we are very open to negotiate a discount in that penalty. We don’t have a specific blanket answer for this, but we may even drop the entire interest penalty charge if we get your business again.”