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 bond in place or go through the cancellation process.
If you want to cancel the bond, then you will be required to give the bank 90 days’ notice of your intention.
According to Lee Mhlongo, CEO: FNB Home Finance, the bank will then assist you with cancellation, which involves providing final settlement figures as well as a consultation 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.
Listen to Maya and Mapalo Makhu discussing this and other topics in the My Money, My Lifestyle podcast.
You do have the option to keep the bond in place as a line of credit. In this case the bank will retain the title deed. It is important to note that you only receive the title deed when you cancel the bond, and not when it is paid off.
Mhlongo says if you are simply paying it off and not cancelling, no notice is required. “You are able to transfer any funds into your home loan at any time, saving yourself interest, and if you have a Flexi facility from FNB, you can access those pre-paid funds immediately should you need them.”
According to Mhlongo, to keep your home loan open, simply don’t cancel it and you will continue to have access to any prepaid funds via your Flexi facility or access bond. Keep in mind that you will pay a mnthly service fee, normally R57.50 for home loans that fall under the National Credit Act. 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.
What is the difference between a home loan and a mortgage bond?
Mhlongo says these are practically the same thing. There is a slight difference in that 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), but for all practical purposes they are the same thing.
Fallacy of a 20-year home loan
There is a common misperception that you can only take out a home loan over 20 years. This is not true. You can ask your bank for a period as short as five years, provided you can afford the monthly repayment over that shorter period. So, if you are buying a property for R500 000 and you can afford nearly R11 000 a month, then you can finance it over five years. If you want to give yourself some flexibility you can opt for a ten-year repayment period but aim to pay it off over five years.
This article first appeared in City Press.
Hi Maya
I have a bind with FNB which was on joint with my wife
I have applied for Substitution Of Debtor (SOD ) which I have been decline on more than 2 occasion. I was told by the bank that I m not allow to have the bond running on a person that decease , my wife and I was married COP but she did not leave a will before she pass on , which has force me to pay the bond of , however I was not provided with detail information on the cancelation process and that I have to give notice period to cancel the bond before having it paid of and now i m so confused as to the next step going forward ,will I still need to pay cancelation fee as bond is paid before full term of 20 years
Can you drop me an email – it may be easier to ask FNB to clarify this
My mother paid off her bond with FNB 2 years ago
But never ever closed it. She called a few months ago to enquire about this and she was told that the home loan account was closed. I want to understand how it is closed if she never gave written notice?
It is possible the term of the loan came to the end.
will like some advise on a bond that I’ve had with FNB bank which was on joint name with myself and my husband , by husband is now decease and I’ve put 3 application for SOD which has been decline which has force to pay of the bond as I was told that I am not allow to have the bond on a decease person
do I have to place cancelation request if I have paid of my bond or can I wait till the 20 years full term period to retrieve my tittle deed
You can wait the 20 years – you just keep the mortgage in place and pay R69 a month for the credit facility
HI
I’m purchasing a property for R1 300 000.00 into a trust.
Bond amount: R1 300 000.00 over 30 yrs. at 7%
Interest: R1 813 640.00
Total Bond over 30 yrs.: R3 113 600.00
After the bond is finalized, I will open an access bond and want to pay lump sum into the access bond of R1 200 000.00.
Will I in return only pay off some of the interest with the lump sum?
Bond payment before lumpsum: R8650.00
Bond payment after lumpsum: R3600.00
Total interest over 30 years R1 813 640 – Lump sum R 1200 000.00 = R613 000 + R1300000(Capital left) Bond left after lump sum.
Is this correct or will the lump sum deposit be deducted from the capital amount that will result in a R100 000.00 outstanding bond?
Thank you
The full amount will be allocated to the capital leaving you with a R100 000 outstanding bond.
Hi Martha,
A friend has an access bond facility with Standard bank. They wanted to draw down on the bond but could not. Upon enquiring with their bank, they were told that the facility had been locked down as it was now within a 5 year window before the full term of the bond is reached. (they still had an available fund balance, up to that point).
I’m with ABSA and have 6.5 years left before my bond’s full term is reached. Is this standard (excuse the pun) practice and will I face the same issue? I cannot find anything to such an effect in my terms…
Standard Bank did make a change to their access bonds. I actually wrote about it at the time https://mayaonmoney.co.za/2018/07/what-kind-of-access-bond-do-you-have/
Most banks do start to lower the available credit line as the term gets closer so they are not in a position where someone suddenly draws down R1 million in the last year. However it should not affect any prepayments you have made
In past times banks used to return your contract of you paid up your loan. Why not anymore? Under what piece of legislation was it done and can I insist on getting my contract back?
Interesting, did not know about that. Will find out
Hi Maya
Can I still pay money into a bond account after I finish paying the bond. If yes how does the bank decide on the interest rate and how would they treat any interest from such an account.
There is NO point in paying in once it is paid off as you earn no interest. Rather put the money in an interest bearing account
Hi
I want to settle my bond in 2months time, that’s going to be 13years before settlement date, and would like to keep bond open to access funds
Will the bank not penalize me for settling early, will they not debt me after settlement (except the insurance, lifecover and administrative fees)
As explained in the article there is no penalty if you keep the bond in place. The debit order would only cover the costs. You can clarify this with the bank
Hi Maya…help me with this please…I have enough cash to finish pay off my house loan…instead of paying the full term…what must happen now to stop the.monthly debit order and to close the bond?
You need to speak to your bank about the process. As per the article you have the option to keep the bond open as a credit facility without paying the debit order apart from R69 per month service fee
Hi, my 20 yr bond / home loan finishes in a few months time, from the comments above it makes sense to keep it going and pay the service charge to keep the access facility open.
My question is how best to get more liquidity, The bond is for R350 000 and the property is worth R300 0000 now?
I would like to do renovations that would cost R500 000. Unfortunately due to the pandemic ,my income has become very intermittent, I am wondering if you could suggest the best option for me. Thanks
To clarify, do you mean you have an access bond worth R350 000 – in other words you can access that amount as credit?
If you wanted to access R500k you would have to take a re-advance. There are costs for the registration and you will have to undergo another affordability and credit check.
If your income is under pressure maybe wait a bit before committing yourself or build up some savings once you have settled the bond so you have a cash buffer
Maya Thank you for all your responds from everyone who had a question.
Me and my husband we paid off our bond. Due to financial situation we cannot afford the unknown legal fees we suppose to pay to get the Title Deed but i suggested we keep our bond open to pay insurance and monthly fee as per Standard Bank. He does not understand my point and keep on saying the bank will continue deducting the amount he used to pay because they take it as payment since settlement is done in 10 years time instead of 20 yrs. kindly advice if his version is true.
no that is not correct. The bank will only charge a service fee – maximum of R69 a month – unless you draw down from the bond
My ABSA flexi bond is just about paid up. As far as keeping the title deed safe. Is it not a better idea to settle the bond but not cancel the bond? I don’t feel comfortable having a title deed at my home, or am I being paranoid now?
Such an interesting question. I don’t think anyone can do anything if they steal your title deed and records are kept at the deeds office. The main benefit of not cancelling the bond is having access to the line of credit if you paid it off ahead of time
Hi when you bought a home with a bond of 20 years and in six months time you have the money to pay the full bond, how must you go about and wi’ll there be any penalties and will you pay more than the initial bond amount
You need to inform the bank and give three months notice if you want to cancel the mortgage.
Hello Maya,
I have 2 bonds . One is R1,500000 , over 10 years. My repayment is R19000. I have paid 27 months which is R513000 but my bond statement is still showing R1.300000. owing. How can I check if this is correct. Is there someone I can pay to check this.
I have a second bond . Bond amount is R900000 taken over 20 years. I took out the bond in 2012 . Repayment is R 8000. . I have paid to date 96 x R8000 which is R768000 , yet my bond statement shows a outstanding balance of R600000
Can you help me to check if the bank calculations are correct. What will it cost for this service. Thank You
These figures are very plausible as only in about the 13th year do you start to pay more towards the capital than interest. https://mayaonmoney.co.za/2019/05/the-stubborn-home-loan-debt/
You can ask for an amortization statement – this will show the interest and capital payments.
Hi Maya
I am settling my bond early – 16 years
I have the option of cancelling the bond and was told that it would cost R10000.00
I am not selling my house..just peace of mind knowing that my house is paidup.
Or leaving the it in safekeeping at the bank ..nil balance no access
Which would be tge better option
Audrey
If you read the article I explain the pros and cons. For R69 a month you can keep a credit facility which seems like a good option.
Maya I have finished paying my bond with standard bank over a period of 17yrs.Is there money due to me from the bank
No, you only paid interest on the outstanding balance.
Hi Maya, would just like to confirm my understanding of the early settlement payment.
I would like to buy a property using a mortgage bond, with the intention of selling it after I renovate it.
If I sell the property and thus in effect “cancel” the Mortgage, the maximum penalty would be 3 months interest on my outstanding balance.
Is the 3months interest calculated over the total remaining months of the mortgage period? Or would it be the interest portion of my monthly mortgage repayments.
(Eg. Monthly repayment is R8 000, and R6 000 of that is interest?)
The three month penalty is usually not an issue when you sell the property as it takes around that long for the paperwork to be finalised.
The three months penalty is based on the interest you would have paid for those three months, not the full installment
Hi Maya.
I am interested in taking out a bond for a house in a new development high security complex. Am I allowed to take out more than what the costs are to build the house? Lets say the house is worth R1500 000 and I want extra R200 00 for extras in the house.
It depends on the bank – they will have a rule on the equity to loan ratio. But it is highly unlikely.
Dear Maya:
I have read all queries and your answers, it is so interesting and helpful!
I have paid off my bond and I am 70+ years old and not qualify for any credit facilities which was told from my bank .
I am planing to sell the house and buy / move to a retired villages, at this point, is it worth paying more than R5000 to have my Deeds title or better to leave it until next time when sale and buying? Which way is more economic and sufficient?
Wait for the sale – it doesn’t make much difference and you can do all the admin at the same time
Dear Maya,
I have a bond with Standard Bank, still outstanding with R400, 000. Is it advisable to settle it? How much will I save? Will i qualify for a discount?
You save on the interest that you are currently paying each month
If I do early full settlement now, and I give 90 days notice to cancell the bond, will there be penalty fee for early settlement? (Bond only expires in a years time.)
You can settle in full and keep the facility but you have to give notice to cancel the mortgage
Dear Maya
I’m assisting my father. He paid off his home loan two years ago but kept the account open for insurance payment to continue. He misunderstood a call from the bank shortly after he paid off the home loan and forfeited to collect his title deed papers from the bank. I am now trying to help him get the title deed. My question is, will he be liable for a cancellation fee of that account?
If the home loan was paid off as part of the normal payment profile then there should not be any cancellation fees. There are however some legal fees in getting the title deed.
Hi Maya,
My divorce settlement is to have the house to my name. The bond was registered on both my name and ex-husband’s name. He paid off the bond. I still want the bond open but I want his name off the bond.
What’s the process to keep only my name?
Thanks
Malentsho
You would need to speak to the bank. Your bond application would need to be based on your current affordability. You have to re-register the bond in your name but negotiate those fees!
Hi Maya
I would like to find out if I payoff the bond and keep the bond in place, will I be liable to for cancellation fees when the bond is transferred to my name and I’ve completed the bond term as per home loan agreement?
If your bond has already been paid off and you only have the loan facility, then you can apply to cancel the mortgage. Always best to ask the bank first
Hi Maya
I have a bond with ABSA(R349000: PURCHASE PRICE), with a balance of R322000(7th year of 20 years), and my property is worth around R470000 now, and I want to refinance it with either of the following banks/financial providers: FNB; CAPITEC; SA HOME LOANS. Please advice.
Ask Absa for a quote and then shop around! It may be cheaper to stay with Absa as they may offer a discount on the bond fees
Me and my partner bought a house together. Means it’s a combine bond. We want to split. We not together anymore. And we not married. I want to know the following. I paid for everything…lawyer costs…transfer fees and I paid a depisot out of my pocket alone. So what going to happen now if I want to keep the house on my name only. Do I have a rite to deduct the money for the deposit and transfer fees?
you would need to sit down together and work out what is fair. Are you paying out any value of the property to your partner? You could assess the value less the input costs you paid for example.
I have paidup my credit account at Russell’s and they keep on diducting the monthly payments even though I wasn’t owe them anymore, so what must I do to get my money back because they keep playing dark and dive to me please help me out?
Get an up to date statement from Russels and close the account because you may find there are facility fees or credit protection fees that have accumulated.
Dear Maya…would you still have to give notice if you have a small balance on your bond account and your repayments will settle the balance over the next few months?
You only have to give notice if you are going to cancel the home loan. If you keep the facility open (with a zero balance) you shouldn’t have any penalty fees. But to be on the safe side check with your bank
Thank you very much this is very helpful
Hi Maya
I have a bond of R950 000 and I am now owing an amount of R660 000; and my monthly payments is R12700 per month. I am paying an extra R800 and am planning from this month to add an extra R500 into this account. My plan is to pay off this bond in the next 4 years. Is this R1300 extra enough to reach my goal?
I always use Nedbank’s calculators when looking at home loan terms and payments – have a look at these
https://www.nedbank.co.za/content/nedbank/desktop/gt/en/personal/tools-and-guidance/calculators/shorter-repayment-period-calculator.html
I have decided to pay an extra R 1000 for my R400 000 bond via phone? will this help me in any how?
Was I supposed to fill in any documents maybe?
I tried to ask this question the consultant at the bank she did not have a clear answer for me
Any extra payment into your mortgage will reduce the length of time to pay off the mortgage. Just check your next bank statement to make sure they have deducted the extra R1000
Hi Maya. Super article. For clarity, if I settle my home loan in eg. year 5/20 I will effectively only be paying the interest on the loaned amount to the day it was settled ie interest on 5 years, the balance would just be a principle capital repayment only. Correct?
correct
Hi Maya just want to make sure ,I sometimes hear people saying when you have paid your bond off there is money that you claim from the bank just forgot the name of the process
Just want to ask if is true
I am not aware of this…it may be that you can cancel your insurance that covers the mortgage, but that wouldn’t pay you out anything
Good day
In your opinion which bank offers the best “flexi facility” or pre paid funds facility on a home loan currently?
Regards
They are all fairly similar now due to changes in the credit act. Just make sure you understand how it works
Hi Maya. If i pay off my bond and opt for the credit facilty does it still come with bond protector and building insurance ??
If i pay off my bond does the bond protector cancel autamatically or i have to cancel it myself ?? If im cancelling myself can i cancel it immediately??
technically it should cancel if you have not drawn down on the facility but it is best to check with the bank to make sure it has been cancelled. Make sure it is re-instated if you do draw on the facility
Good Day. I have been putting additional funds monthly into my bond access account as often as possible. Sometimes around 6000 more than my bond repayment per month. On a webinar I was on, the financial advisor stated that there are tax implications if I pay anything more than 3000 extra per month. Is this true? I consulted with my own financial advisor subsequently and he said that is not correct, I can deposit any amount into the bond access account with no tax implications. Im confused. Articles I’ve read said nothing about a maximum amount that should be paid and all articles elude to that we should pay off our home loans as quickly as possible. Kindly advise.
Not sure what the webinar was about, but there is no maximum. You can pay as much as you want
The adviser on the webinar may have been referring to investment property where you can only deduct the interest portion of the mortgage for tax purposes?
Hi I have just settled my smart bond at FNB; I do not want to cancel it, so I have left it open. My question is, can I use it to make an interest. For example, if I put maybe R50 000 on, can I get some interest from it or I won’t get anything by doing that?
You earn no interest, rather use a 32-day notice savings account
I contacted Fnb regarding my one account which I wanted to settle , it was very strange that no one could help at head office level they all dont work with one account.I was tranfered from one person to the other, even my branch does not work on one account, I was told at my branch that I was the second person enquiring about one account hence I had to call head office.What a customer service!
My question is what happens now after I have settled the balance on my one account.
Thank you
Hi
I have been paying my bond including interest since 2010. The capital amount was 390 000. Now the balance is showing 304 000 and interest is still charged. Why is my bond not reducing? And the interest as well. I was initially told i will pay for the ineterest for 7 years, then i will see a difference in my balance after that as i pay. There is no change…
Fnb customer- 20 year bond
This has been sent to FNB – they will be in contact
If i settle my bond what will be the interests when I açcess the prepaid funds?
At the same interest rate agreed on your home loan agreement
Hi maya
I brought the house last year and i put the deposit R400.000.00 the house was R1.100.000.00 nd the bank loan me R700.000.00 but the interest rate was not good. Monthly i pay R7.300.00 including home insurance period of time 20 years
But now i want to settle my home loan because the interest rate was so higher but if i settle now how much i can pay
You need to ask the bank what the amount would be to fully pay off the property. Also check because unless it was a fixed interest rate, the interest should have decreased
Thanks a lot ?
Hello,
Is it advisable to transfer an existing mortgage with higher interest rate to another bank that offers lower interest bearing in mind all applicable costs. If yes, do I transfer the original loan amount or the outstanding balance?
The outstanding balance makes the most sense as you do not need a larger mortgage. Make sure you do the calculations on the bond registration costs and try negotiate a reduction.
Three months of your current monthly interest amount. Thats what I paid for early setlement and cancellation in february this year. But I am happy because its a small amount compared to non settling. Now I am debt free and ahve my title deed.
Thanks for the feedback. It is worth noting that if you give 3 months notice you can avoid those interest payments
Are you saying if you give three months notice you avoid these interest payments?
So you saying that the bank will not charge you interest during the three months notice period. I think you will still pay interest/ penalty in the three months cancellation period, let us have your views
The bank requires three months notice. During that period you would pay interest on any outstanding amounts. If you do not give notice and settle in full, they will calculate the interest you would have paid over the next three months and add that as a “penalty” fee. Does that explain it better?
Hi
Absolutely, thank you for great advice. Stay safe
I took out a 20 year loan but 9 years down the line I would like to pay off my bond. What are the ;likely cost implications if I cancel the bond as I want to invest my rental income elsewhere.
It is best you ask the bank about the cost of cancelling the bond and receiving back the title deeds. Or you can have the bond paid up but keep the facility – as per the article
I have smart bond and I’ve been paying it for about 10 years now. When canceling it will I pay for the outstanding years or will I pay the difference?
You will have an outstanding balance which the bank can provide you. It should be on your monthly statement. If you settle the full amount and wish to deregister the bond,then either you need to give three months notice or they will charge you three months interest
Great information which unfortunately the finance houses do not give out. Also when one has a bond and seeks information, maybe refinancing the loan, the bank treats one as a new customer. People within the finance institutions need more training on what options there before going with the straight forward agreement..
Valid point…
Hi there, if you don’t give cancellation notice and have paid the bond off fully, does that account remain open with the monthly fee charged to it, ie then I just have to pay the R59 per month? And the benefit of this is access to a line of credit should I need it, ie refinance the house partially to pay for renovations, for example? What would be the benefit of cancellation once the house is paid off?
You are correct – it will stay open but the monthly fee will be charged. Any “pre-paid” amount is still accessible as a line of credit. Once the 20 year period ends then the bond will be cancelled as per the agreement. The only benefit of cancelling the bond before then is that the title deeds are returned to you – and you are not paying the R59 monthly service fee on a credit line.
I hope I am not late. Lets say I pay off ma bond in few years than expcted and I did not cancel th bond, can I access that finance to pay for another property?
Yes – you can draw on any “pre-paid” amounts. Keep this in mind: If you have a property which you rent out, you can deduct the interest from the rental. So you want the bond to be on the property that you are renting out.
I have paid off my bond. I am only paying for insurance. If I decide to save money on the bond facility , will the interest be good? How do I apply for flexi facility?
You can’t save money in a bond. What you can do is apply for a credit facility using your property as collateral. If the bond has not been cancelled then that would not be a problem. If the bond was cancelled you have to reapply with all the various costs involved. If you want to put money into savings, then rather put into a money market or fixed deposit
I am paying 8400 for 20 years including the insurance from FNB for a house I bought for 550 thousands and you telling me I can pay 11000 monthly if I wanna finish in 5 years? Bind or whatever you call it is expensive. I wish what you are saying was possible with FNB but u don’t think so.
Interesting information
Are we still seeing early settlement penalties these days?
you must give three months notice before cancelling the bond – but not if you just pay it off
The shorter the repayment period, the higher the interest rate. The banks never miss a beat.
As far as I know the interest rate is not linked to the period.
Correct – although FNB told me that a shorter period loan has a lower risk profile and could even qualify for a lower interest rate
Thanks!
I m struggling to pay my bond and a car due lot of debts, how can I do… Thanks
The first step is to speak to your bank about your options regarding your home and car finance. Also draw up a schedule of your shorter term debt and see if you can pay some of that off quicker just by adding in a few extra hundred rand a month – read this article https://mayaonmoney.co.za/2016/05/easy-debt-payment-strategy/
If you are unable to meet your repayments at all – then consider debt review to protect your house and car
I have been retrenched from work but I am currently under administration, I have informed my administrator about my retrenchment but they are saying that I will have to continue paying otherwise I will be in default and my creditors could demand payment. I am needing some advice regarding this please
This is a tricky situation because you are already under administration. My suggestion is to contact the Credit Ombuds to at least understand your rights and obligations in this context. You could use a portion of your retrenchment package to settle the debts.
If married in community and the mortgage bond is registered in both our names but we subsequently divorced, and the other party continued with bond payments, in whose name will the title deed be at the final payment of bond payment?
It depends in whose name the property was bought – if it was in a joint name and you never changed it, then it would still be in the joint name. The title deed is separate from the home loan
Unfortunately it wl be in both names .
How much about can it be to cancel a R320 000 bond?
they did not provide figures so best to ask your bank directly
I am planning on settling my bond with SA homes 52 months before the contract and my balance is around 340,will I be saving good money or should I see contract through
The sooner you pay off debt, the more money you save. But I do suggest you notify them as they are allowed to charge three months interest if you do not
I actually noticed if you apply with a longer repayment period, the interest rate will be lower. Its best then to apply for the maximum period but take less yime to pay.
That is interesting – makes sense as the cost of acquisition is high so they want you to remain paying as long as possible. I will check it out
How do you get or apply for Flexi facility/access bond when I have bought the property for cash?
You would have to take out a bond on the property – so basically hand over the title deed as security over the loan
Don’t they penalize you for that?
there is no penalty to pay off your home loan sooner but you do have to give three month’s notice when cancelling the bond
apparently not true – the interest rate can actually be LOWER for a shorter-term. But repayments would be higher as you are paying off in a shorter period
Hi. I wanted to find out if the bond is in 2 peoples names and they want to pay off the bond then transfer the property onto 1 person’s name, will this be possible with the bank?
Yes, but there are some costs involved as the ownership needs to change at the deeds office