Should you close a paid-off home loan?

Title DeedMorake writes: A friend of mine’s home loan is nearly paid off and she wants to know if she should close the home loan or keep it open. What is the procedure to closing a mortgage? Do you have to pay transfer duties to get the title deed?

Maya replies:

A mortgage facility is a very inexpensive form of credit and there could be a benefit to keeping this facility available for short-term borrowing. Moreover, there are costs incurred when registering a bond on the property again in the future.

This does, however, come with a serious risk warning. The reason that you pay less interest on your home loan than other forms of credit is that your house is used as collateral. You don’t want to be in a position where you are using the mortgage facility to fund holidays and lifestyle expenses and risk losing your home.

It could, however, be used to purchase a car for example at lower rates – but you must be disciplined enough to pay this off over four or five years and not the 20-year life of a mortgage. If you feel you would be tempted to dip into the mortgage for non-essential items, then it would be best to just cancel it to avoid the temptation.

Calvin Ndlovu, head of operations at FNB Home Loans explains that there is no fee payable to get the title deed, but there is a fee payable to the attorney for cancelling the bond.

The title deed is held in safe custody by the bank and only on confirmation from the attorneys that the bond has been cancelled in the Deeds Office will the title deed for the property be released to the client.

The time taken to cancel a bond in the Deeds Office varies from office to office around the country. In the Johannesburg and Pretoria Deeds Offices, the following time lines apply:

  • Once lodged in the Deeds Office, the cancellation takes 10-15 working days to go through. The cancellation documentation includes the original title deed to the property.
  • The title deed is then endorsed with the words “Bond Cancelled”.
  • It then takes the Deeds Office 4-6 weeks to return the title deed to the cancellation attorney.

The attorney will then return it to the bank who will forward it to the customer.