04 Apr 2011
Property owners who took out home loans on property prior to the National Credit Act being enforced should be aware that there are a number of additional charges that can be imposed by banks when a bond is cancelled.
The irony is that the last bond repayment on a house does not mean that the property is paid off or that the ownership of the property has automatically transferred from the bank to the owner.
This is because a number of fees must first be paid to a bank to cancel the mortgage loan. These fees include the legal costs (R1 500) postage and petties of R250, a Deeds Office search costing R100 along with a fee of R140 as well as an electronic conveyancing charge of R50.
The total amounts to just over R2 300. Lawyers refuse to lodge a bond for cancellation unless those fees are first paid into their account.
According to the National Credit Act, banks must disclose all costs to the client when the loan is negotiated. However, this is not the case prior to the NCA and when it’s time to cancel a bond, banks usually appoint one of their firm’s of attorneys to attend to the cancellation of the bond
The fee for that is usually between R1 200 and R1 500.
Lawyer Meyer de Waal says that many homeowners are surprised by the additional charges that they get lumbered with once they have paid off their bond.
He says the charges to cancel a bond should be explained in the terms and conditions of the bond agreement but this is not always the case. The Law Society of South Africa provides guidelines on the fees charged by the lawyers for this service.
The costs of cancelling the bond appear to be relatively standard and have no bearing on the value of the property that has been fully paid for.
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I have found that if you give your banksnotice, usually three months, that you are cancelling, they drop the charge - Lorain
The following statement in your article is misleading, namely “The irony is that the last bond repayment on a house does not mean that the property is paid off or the ownership of the property has automatically transferred from the bank to the owner”. Firstly, the bond cancellation costs cannot be regarded as part of the purchase price of the property – it represents the fees and expenses for a particular act of registration and is usually not even compulsory where the property is not sold. The owner would be well advised not to cancel the bond so that a new bond does not have to be registered if he should again lend money from the same bank. Secondly, the bank did not become the owner of the property when the bond was registered, so that there is no question of ownership having to pass from the bank back to the owner. - Dave
With respect I’ve to point it out to you that even before the new Act it was always clearly stated in the bond conditions that on cancellation of the bond any costs incidental thereto will be for the account of the Mortgagee. It’s a matter of the client not being bothered or taking the time the read and understand the conditions and then the acting firm being blamed for “daylight robbery” for a service being rendered. After all nothing in life comes for free, not your birth or death. - Christina
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