Hundreds of thousands of South Africans have paid-up home loans which may still be costing them money.

Homeowners may not be aware that in some cases, their paid-up mortgage will continue to attract fees unless they have canceled the bond over the property and have had the title deeds returned to them.

According to Absa, of the total title deeds held by the bank in storage, about one-fifth represent paid-up properties. Considering that there are more than two million mortgages nationally, this suggests that banks could hold around 400 000 title deeds for paid-up properties.

Most banks, with the exception of Absa, continue to charge a service fee of R69 per month on an ordinary home loan account that is fully paid-up. This is different from the credit facility fee charged to an access bond account holder who is paying a service fee to keep the credit facility available.

Even if a mortgage is paid off, the title deed will continue to be held by the bank until the client instructs the bank to cancel the bond. This requires an attorney to update the deed’s office to remove the bond over the property and to have the title deed returned to the homeowner. This is at the client’s cost which could be between R4 000 and R10 000.

According to Nedbank, as long as the mortgage bond is not cancelled, the bond account will remain active but dormant. During this time Nedbank will continue to charge a service fee of R69 a month.

According to FNB the account will remain open with a zero balance until the customer is ready to cancel or the loan reaches the end of its term. “This will mean that the monthly account fee will continue to be charged, usually R69 per month, depending on the customer’s agreement.”

Standard Bank confirmed that as the account would remain active the bank would still need to charge a service fee for account maintenance.

Absa is the only bank that does not charge a fee when it comes to paid-up home loans.

“At Absa we retain the title deeds of all paid-up bond accounts in safe custody until we are instructed by our customer to cancel the account. This also applies in cases where an account is paid up before the loan term concludes,” says Mary Motsuku, Head of Sales and Service Enablement at Absa Home Loans.

“Should a customer in this position apply for a further advance on their home loan, the account is then removed from safe custody to process the application. While title deeds are held in secure storage, those accounts do not draw monthly service fees or any charges.”

Insurance premiums on paid-up home loans

Service fees are not the only costs that can be incurred. In many cases there may be insurance premiums going off the bond account. This could include life cover or building insurance.

“It is important to note that if the client has insurance, such as life cover and homeowner’s cover, those payments will still be deducted from the bond account, potentially incurring debit interest charges. If there is no servicing (payment) it will eventually fall into arrears and trigger the collections process,” explains Nedbank.

Angela Glover, Head of Product at FNB Home and Structured Lending Solutions says that if the client had credit life insurance covering the outstanding loan amount, the premium will reduce to zero as the outstanding balance is zero.

“However, in the case of homeowner’s cover (building insurance) the home loan account will continue to deduct the premium until debit order details are updated, the term reached its end, or the policy is cancelled. This can result in additional interest charges if the home loan is not being maintained.”

This means a homeowner who believed they were debt free may suddenly find a letter of demand for unpaid service fees and premiums for insurance they may not realise they have.

“It is advisable that the customer moves the premium debit to their transactional account and cancel the home loan to avoid this scenario. At the moment we are running a few initiatives to educate customers around this and are also assisting those customers with increasing balances by helping cancel the bonds,” says Toni Anderson, Head of Home Services at Standard Bank.

For some homeowners, forgetting to cancel the mortgage bond may be an administrative oversight, however many homeowners cannot afford the R4 000 to R10 000 fee that attorneys charge to cancel the bond.

According to Glover, in certain instances where FNB is made aware of vulnerable customers who need help, this is provided on a discretionary basis.

Standard Bank says that they do run campaigns to assist customers who cannot afford the cancellation fees. “In some instances, we give a discount on the cancellation fee,” says Anderson. However, if the outstanding balance of fees and premiums has grown significantly, these would also need to be settled.

“While there are costs associated with this cancellation process, we occasionally assist some customers with historic accounts held in safe custody to retrieve their title deeds by co-sponsoring the cancellation costs with our attorneys,” says Absa’s Motsuku.

Nedbank confirmed they will offer assistance to pensioners and unemployed clients. “When clients approach Nedbank for assistance, we negotiate discounts on their behalf. This can be particularly helpful for lower-income earners who may not have the money to cancel the bond”.

What to do if you have paid up your mortgage

• Either cancel and insurance premiums, or if you need to keep the insurance, move the premium payment over to your transactional account.
• If you want to keep the account open, you can convert to an access/flexi bond to access your prepaid funds.
• If you want to close the account, engage the bank regarding the cancellation process. If you don’t have the funds to cancel the mortgage, ask the bank for assistance.

Absa handing back title deeds

This year Absa undertook an initiative to hand over 1 500 title deeds on paid-up home loans.  This relates to home loan customers that have a paid-up bonded property with the bank dating back to the period between 1950 and 1990 but who have not cancelled their mortgage.

“This could be for various reasons: either the owners have passed away, they cannot afford to pay the cancellation fees to conveyancing attorneys, or they are not aware of the next steps they need to follow once their homes are paid in full,” explains Motsuku.

Home loan customers who paid off their home loans before 1990 can call 0860 111 007 or email titledeeds@absa.africa to initiate the request for cancellation of their bond.

Alternatively, customers without access to digital platforms or who choose to be assisted in person can go to their nearest Absa branch and ask an agent for assistance to start the cancellation process.

This article first appeared in City Press.