Yes, In the time between the application being approved and the loan being registered, you have the option to back out of a home loan. In South Africa, the majority of bond originators and banks require a written notice of your intent to cancel your home loan at least ninety days in advance.
If the process of transferring the property has already started, you may still be responsible for paying the commission that was agreed upon with your real estate agent as well as the fee that was agreed upon with the conveyancing attorney.
In accordance with the National Credit Act, financial institutions and bond issuers have the legal authority to charge you a penalty fee if you decide to terminate your bond prior to the conclusion of the contractually agreed-upon loan period.
If there is a deposit, it is possible that this money could be used to cover these losses as long as the buyer is okay with this arrangement.
Is it possible to cancel a home loan?
Yes, but fees will be payable depending on the status of your bond. I.e., is the bond paid up or not?
Paid up home loan
In the event that you have finished paying off your home loan and would like to cancel your bond and close your home loan account, in this scenario, you will take ownership of the title deed to your property, and you will no longer have a home loan account.
- There will be a fee associated with the cancellation of the bond, which will need to be calculated and paid to a cancellation attorney.
- In order to complete the cancellation process, your attorney will have to go to the deeds office and cancel the bond that was placed against your property.
Loan not paid up
If you wish to cancel your bond but your home loan has not yet been paid off in full, you are required to give notice. Please keep in mind the following:
- In the event that you plan to sell your home or want to cancel your home loan for any other reason, you will either be required to give a 90-day notice or pay an early termination fee.
- When a client cancels a home loan before the end of the agreed-upon loan term, a bank is allowed to charge a fee known as an early termination fee, which is also commonly referred to as a ’90-day notice.’ This fee is prescribed by the National Credit Act, which also makes provision for a bank to charge a fee.
- The amount of the early termination fee is calculated by adding the interest for the previous three months (based on your outstanding balance, interest rate and remaining loan term).
- In the event that the bond is canceled prior to the expiration of the 90-day notice period, the pro rata amount will be charged for the days that are still outstanding.
- If the bond is canceled after the initial 90 days, there will be no charge for an early termination fee.
- The notice will be valid for a period of one year.
- You will be required to give notice once more if the cancellation of your home loan does not take place within the given time frame of one year.
References
ooba: Can I cancel a bond before registration? (n.d.). www.ooba.co.za. Retrieved October 25, 2022, from https://www.ooba.co.za/faq/cancellation-of-bond-before-registration/
Tech4Law: Withdrawal of Approved Bond Prior to Registration – Conveyancing News – Tech4Law. (2020, June 8). www.tech4law.co.za. Retrieved October 25, 2022, from https://www.tech4law.co.za/business/conveyancing-in-south-africa/withdrawal-of-approved-bond-prior-to-registration-conveyancing-news/
“Cancellation of Your Home Loan.” Cancellation of Your Home Loan, www.nedbank.co.za/content/nedbank/desktop/gt/en/personal/loans/home-loans/Cancellation_of_your_home_loan.html. Accessed 25 Oct. 2022.
