A Property24 reader wants her name to be removed from a mortgage bond that she signed with her partner, but isn't sure how to go about it.
"Please help, what can I do?" the reader asks.
Simone Da Camara and Farzanah Mugjenkar, attorneys and conveyancers at Abrahams & Gross attorneys respond:
In order to have your name removed from the mortgage bond, you would need to either, formally have the mortgage bond cancelled, or apply to have your partner substitute you as the debtor, which means he/she will be fully liable for the mortgage bond. In addition, you would need to transfer your undivided half-share of the property into your partners name, by means of a formal transfer. If your partner will be purchasing your half-share in the property, you would need to enter into an Offer to Purchase to this effect. If your partner will not be purchasing the property from you, a different agreement might need to be entered into, depending on the circumstances of the matter.
In order to cancel the bond, you would need to give notice to your respective Bank that granted you the mortgage bond, of your intention to cancel the mortgage bond. It is important to note that you must give your bank 90 days’ notice of your intention to cancel the mortgage bond, in order to avoid the bank charging any penalties. Secondly, you will require attorneys to be instructed to formally cancel the mortgage bond at the Deeds Office. Your bank will issue the attorneys with cancellation figures, which is essentially the amount that is still owing on your bond plus any interest and fees, which is required to be paid to the bank in order to settle what you owe on the mortgage bond. This amount must be settled by a bank issued guarantee, in order for your existing mortgage bond to be cancelled. You will thus need to pay the amount owing into the trust account of the Attorneys in order for them to issue the guarantee to the bank.
Alternatively, should you not have the required capital to settle the mortgage bond upfront, you may apply to your mortgage bond for a “substitution of debtor” instruction. What this means, is that your partner will apply to “substitute” themselves as the only debtor for the mortgage bond on the property. It is important to note that the bank will do a credit assessment in order to see whether your partner will be able to afford the respective property on their own. It is also important to note that attorneys will need to be instructed to attend to this substitution of debtor at the Deeds Office.
Furthermore, it is important to note that attorneys fees will be payable on the cancellation of the bond or the substitution of debtor instruction.
Transferring the property:
It is important to note that you cannot be removed from the mortgage bond without being removed off from the Title Deed of the property. In order to effect this, a formal transfer will need to be attended to by the Transferring Attorneys. It is important to note that attorney costs will be payable, as well as costs relating to obtaining a Rates Clearance Certificate and any Home Owners Association Consent fees (if applicable), but more importantly, depending on the value of the property, transfer duty may be payable to SARS in order to obtain a Transfer Duty Receipt.
Additional information: How to escape joint liability under a mortgage bond
Terminating a joint bond if both parties want it cancelled
Mugjenkar, says there are two ways in which a joint bond may be dealt with. One option may be that both parties may jointly decide to formally have the mortgage bond cancelled. The first step would be for the parties to give notice to the respective bank that granted the mortgage bond, of the intention to cancel the bond.
It is important to note that you must give your bank 90 days notice of the intention to cancel the mortgage bond in order to avoid the bank charging any penalties. The bank will then instruct attorneys to formally cancel the mortgage bond at the Deeds Office. The bank will issue the attorneys with cancellation figures, which is essentially the amount that is still owing on the bond plus any interest and fees which is required to be paid to the bank in order to settle what is owed on the mortgage bond. This amount must be settled by a bank issued guarantee in order for the existing mortgage bond to be cancelled.
If the property is not being sold, then the parties will need pay the amount owing into the trust account of the attorneys in order for them to issue the guarantee to the bank. Alternatively, if the parties decide to sell the property, the purchaser will need to provide a guarantee emanating from the purchase price in favour of the existing mortgage bond.
Terminating a joint bond if one party wants to be sole debtor
A second way in which joint liability may be terminated, is if one of the parties decide to take full liability for the mortgage bond, and agree to be substituted as the only debtor under the mortgage bond. The parties can then apply to the bank for a “substitution of debtor” instruction. It is important to note that the bank will do a credit assessment in order to see whether the relevant party will be able to afford the respective property on their own. The bank will then appoint attorneys to attend to this substitution of debtor at the Deeds Office.
Attorney’s fees will be payable on both the cancellation of the bond or the substitution of debtor instruction.
In addition to the above bond process, a formal transfer of ownership of the property will also need to take place, as mortgage bond liability follows ownership. Therefore, a Transferring Attorney will also need to be appointed to attend to the simultaneous transfer of the property.
A joint bond can be cancelled under certain conditions
In conclusion, a joint mortgage bond may be terminated either by wholly cancelling the mortgage bond by both parties, in which the whole outstanding mortgage bond amount must be settled. Alternatively, parties may agree that one party substitutes the other party as the only debtor of the mortgage bond, however the determination of affordability will be subject to the discretion of the bank.
Speak to a conveyancing expert
For assistance or advice with your property and associated bond, or any property and conveyancing related matter, speak to our experienced Conveyancing and Property Law attorneys.
*Article updated 20 October 2023
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