When you cancel your mortgage bond, most banks will contractually charge you a cancellation fee. Such fees can be for early termination of the bond or for giving less than 90 days’ notice of your intention to cancel, but is there a way to avoid these costs?
Unless your mortgage agreement is silent on the matter, generally the only way to avoid or reduce the bank’s cancellation penalty, is to meet the requirements of the bank, namely, to give the required number of days’ notice. If you don’t provide the required notice of your intention to cancel your bond, banks can charge an early termination penalty that is equal to the interest that would have been payable under your mortgage agreement, for a period equal to the difference between three months and the settlement notice the consumer has provided (if any).
Whether you want to cancel your bond because it has been settled, or because your property is being sold, there is, unfortunately, no way around paying bond cancellation costs. Financial institutions usually instruct an attorney to cancel such a bond on their behalf, the costs of which must be paid to the attorney.
In terms of this “90-day rule”, the clock starts counting as soon as the institution receives written notice that you intend to cancel your bond. Yet, should your bond cancellation register only after 90 days have passed, you will not have to pay an early termination penalty.
There are some exceptions to this general rule where an early termination penalty will not apply, namely in the event of sequestration or in the case of a deceased estate.
Should the bond be cancelled within 90 days, the bank will charge a pro-rata share of the penalty on the remaining number of days. As the contracts of banks differ, however, it may be worthwhile to have your attorney look at your mortgage agreement with the bank to see what requirements have been set regarding avoiding a bond cancellation penalty.
As one of the preferred bond attorneys for SA Home Loans in the Vaal Triangle area and beyond, backed with more than a decade of providing premier legal solutions catered to your needs, contact us so we can provide the guidance you deserve through your real estate journey.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)