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Video: What happens when you pay off your home loan?

Apr 28, 2020

If you have been paying extra into your home loan and have settled it before the required date, you need to decide whether you wish to keep the mortgage bond in place.

The home loan is the credit facility that the bank grants, while the mortgage bond refers to the legal agreement that is in place. The bond is registered at the Deeds Office. For practical purposes people use the terms “home loan” and “bond” interchangeably.

If you cancel the mortgage bond, you receive back your title deed and close the home loan credit facility. If you ever wanted to take out another mortgage on the property you would have to reapply and register for a new home loan, with all the associated costs.

Alternatively, you could keep the mortgage bond and the credit facility available. This then means that you delay your cancellation to a later date ‒ either when you want to sell or at the end of your 20-year term. If you have no funds owing there will be no interest paid, but there will be a monthly service fee of around R57.

If you are simply paying off the home loan and not cancelling, no notice is required. You are able to transfer any funds into your home loan at any time and can access those pre-paid funds immediately should you need them.

If however, you wish to cancel the bond, then you will be required to give the bank 90 days’ notice of your intention. The bank will then assist you through the cancellation process which involves providing final settlement figures as well as consulting with bond cancellation attorneys, as the bond needs to be cancelled in the Deeds Office.

If you are cancelling the bond your attorney will work with the bank to return your title deed to you. Attorney fees will apply.

Having no debt on your home is a great goal, but a home loan facility is the cheapest credit available.

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17 Comments

  1. Am having a home loan with a bank now m thinking of extending my house ;tell me what to do and I suppose to do a loan to the bank .advise me plz

    Reply
    • You can speak to your bank and see if you have any ‘equity’ in your house. This means that the house is worth more than what you owe on it. The bank could then provide you with additional mortgage funds. The interest rate would be lower than a personal loan but find out any initiation or bond registration fees first – those can be expensive

      Reply
  2. Kindly further advice on the new regulations governing investment right of review, eg retirement annuity

    Reply
  3. This artical was very helpful, regarding paying of your home loan

    Reply
  4. I am selling my property and have started the process already. I intend to buy another property what can you advise me putting a lump sum deposit or pay extra monthly

    Reply
    • A lump sum deposit would save you interest from day one – so that is a good option. If you do it as pre-paid funds (so it remains accessible) then you still have access to those funds even while lowering your interest

      Reply
  5. I paid off my home loan and in the process of cancelling the bond. I want to buy another house to the value of R1,5m and aged 52. Is it a wise move to sell or rent the paid up property considering my age?

    Reply
    • That would all depend on your financial situation and also whether you would qualify for the R1.5 million or need a deposit from the other property.
      If you keep the rental property make sure you can carry costs if you are unable to find a tenant.
      We are covering property rental in Money makeover in the next few weeks so sign up for the Mayaonmoney.co.za newsletter to keep informed

      Reply
  6. What will happen to the monthly home loan payment as the repo rate has decreased?

    Reply
  7. Thank you for the elightening information. I would like to know if it’s possible to sell my house to the third party before cancellation of the bond ? Let’s say my house’s value is R1500000.00 and settlement amount is R760000.00 and the third party qualiies for value amount and afford all requirements.

    Reply
    • If you sell your house then the mortgage over the property is automatically cancelled as the property now belongs to someone else. You would have to settle the outstanding amount from the sale of the property. This would be handled by conveyancing attorneys

      Reply
  8. Facing retrenchment due to covid 19..i want to pay my bond off but still keep the acc open.. Can the bank offer me a better settlement amount???

    Reply
    • I doubt it – that is the amount you owe them. There is no discount for settlement

      Reply
  9. Hi Maya, I need advise. I have 2 personal loans with the bank amounting to R180k. I have a bond of R440k. With the current economic crisis who would you suggest I pay more in order to release myself from further stress? I have funds I need to use wisely to service the debt. Pls advise

    1: should I pay more on my bond
    2:should I pay more on the loans?

    Reply
    • Your loans undoubtedly have a higher interest rate so you should start with those. Target just one, focus on paying that off and then increase repayments to the other one

      Reply

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Maya Fisher-French author of Money Questions Answered

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