Bond Cancellation Penalty Fees

[daveob]

Just something my wife picked up on a few days ago.

If you're selling your property ( maybe to buy something else ) and you're going to cancel your existing bond, the banks charge a cancellation fee.

So, quickly on the phone to our existing bond holder ( FNB ).

In our case, FNB require a 90 day notice period. For every day LESS that you give notice, you pay a cancellation fee.

The calculation that the FNB Home Loans Cancellation Department gave us was :

take :
The bond balance
multiply by the existing bond interest rate
multiply by the number of days that your short of notice ( eg .. giving 30 days notice = multiply by 90 - 30 = 60 days )
divide by 365
divide by 100

and that's the amount of the penalty you'll pay.

Now on our bond balance of R5 it really makes no difference, but on a big bond, you could find yourself with an unexpected Early Cancellation Penalty Fee.

[Graeme]

And its not over yet - in a few weeks time you will get a letter from the Bank's Solicitors asking you to come in and receive your title deeds - for which you will have to pay several hundred rands!

[Yvonne]

My sister has just had a bond with a remaining balance of R37,000 cancelled, just cost approx R3,700.
That is absolutely unfair. This was a bond that had been in place for approx 30 years!

So this is a good tip for anyone in the process of selling a home.

Can one put the bank on "notice" that one intends selling but need the bond kept in place until the succesful sale? to circumvent paying this additional cost?

Yvonne

[Dave A]

I'd suggest waiting until you've got the sale signed up, the finance for the purchaser has been approved and the "subject too" clauses have been fulfilled. In the current market, there is many a slip between cup and lip.

Any conveyancer worth their salt will likely suggest giving notice to the bank when the time is right.

I find it interesting that asset finance seems to have gone a different route, at least with Stannic. They don't levy an early settlement penalty or charge notice interest anymore.

[Martinco]

One other scenario to consider is if you are selling and the deal from the buyers and sellers side seems straight forward i.e the deal is not going to take too long, then one can ,if possible, use other available money ( overdraft, or loan ) to reduce the bond as much as possible and as soon as the money from the sale becomes available to put this back where it belongs. This way you reduce the bond amount a day or two before cancellation and thusly pay a lesser penalty. Maybe one of the fundi's amongst us can verify if this in fact can save some money ?

But if it is a complicated deal taking many months to conclude then I think this is maybe not the right way to go and one can give the required notice in any case.

Something to think about !

[Sieg]

Bond cancellation penalty

Ouch, Graham! Solicitors? No, that is a mob in the UK. Here we have a far more dignified name: "Conveyancers"!

I must point out that when anyone takes a home loan with a bank, it is part and parcel of the terms and conditions (so easily forgotten) that the bank stipulates that when the bond is cancelled, the bank shall instruct the bank's conveyancers to cancel the bond. Obviously there is a fee involved. Who really expects the conveyancer to do this for nothing? And, in my humble opinion, that fee is very reasonable for the work and responsibility and overhead involved. [If you need more detail, let me know and I'll explain what is involved in a "simple" bond cancellation!]

About the 90 days penalty interest that the banks charge (why? because the NCA lays down a maximum of 90 days, otherwise the banks would probably charge more!) - by the time the instruction to attend to a transfer of a property ends up with the conveyancer, it is far too late to then give 90 days notice. This should be done when the Seller first decides to sell the property, even before it is placed with an estate agent to sell.

Sieg

[garthu]

Agreed Sieg. Give notice the moment you decide to sell AND THEN dont forget to renew your notice every 90 days as it expires. I also strongly urge to do it in writing via email/fax. We are having a current one where the seller gave notice, and the bank says no!

[Dave A]

So it's no problem if you run over time to settle once you've given the 90 days notice?

[garthu]

Yup no problem PROVIDED you renewed the notice before the 90 days expired and then the 90 days starts again. Ideally you list today, sell in about 6 weeks and then the attorney gets cancellation figures in anonther 6 weeks adding to 3 months. But hey thats ideal!

[Yvonne]

Seig,

Conveyancing charges are "paid" by the buyer, not the seller, is that correct?

I fully understand that some party must pay for the "cancellation" costs of the bond,
but thought that the years of interest payment took care of the banks administration costs?
So the conveyancer deserves the administration cost of cancelling the bond?

Is the bond cancellation fee listed on the conveyancers account therefore as a charge put to them by the bank, ie. Reimbursed costs.

Or as an actual charge directly from the bank to the seller? and therefore in the total of the final settlement shown on the bank statement?

Apologies, don't know how to word this better!

Yvonne