House paid off. What to do with the bond?

[Werner]

My home loan is paid off, well before the end of the loan agreement. I am noticeing each month a deduction from the flexi reserve, i.e. each month the flexi reserve available is getting smaller and smaller. I've spoken to my bank ABSA and they recommend to keep the bond and have the bank to place the title deed in safe custody. However if I need cash, I would not be able to access the flexi reserve.

- What is the benefit of having the title deed in safe custody at the bank?
- What other options are available to me, if I want to keep access to the flexi reserve?

[daveob]

Check if your bricks & mortar insurance is part of your bond. I recall in the past that it was recommended to keep the bond going to keep the insurance policy alive.

Also, look at the interest rates - if you want to buy a new car or other large item, it may work out cheaper to take it out the bond instead of a new loan / hp agreement.

[Graeme]

A lot hinges around insurance - I cancelled my bond when it was paid up because whilst the bond was open I had to insure the property through the bank when I could make my own arrangements with a broker and insure at a substantially lesser premium. Cancelling my bond was worth quite a lot of money in lower premiums. However, be prepared to pay out about 1k in legal fees to have the title deeds returned to you.

[Dave A]

However if I need cash, I would not be able to access the flexi reserve.

Frankly, that seems to defeat the best (and arguably only) reason for keeping the bond contract alive. Anyone else think the bank might be trying to keep the bond open because there's an income stream attached? Perhaps their slice of the insurance instalment?

Is there any kind of minimum service fee or other cost showing up in the statements, Werner?

Or maybe they just like the idea of keeping the title deeds in their safe - just in case

[Marq]

You do not have to keep your insurance policy with the bank. You just have to show them that you are covered. Absa keeps threatening me with death and stuff if not covered even though they have reference to my policy.

If you can afford the bond repayments, I would keep it alive (without the insurance from them) - even at a higher number - just watch the margins between loans. The question is what to do with the cash you extract from your flexi part?

I would look at investing in another property and using the first bond to finance the second property. Look for something small, easily rentable and easy to maintain. Start setting up a pension plan.

If you want out of the bond scenario altogether, I would get the title deeds out of the banks hands asap ( no matter the cost) - they would be quick to hold it for security if you fall into hard times for any other accounts that you may have now or could have in the future. Its like getting all your sureties back and cancelled. A must for cutting ties with the bank.

[sgafc]

I agree with Marq. My brother experienced a similar situation, with the bank ducking and diving, (offering him a loan etc)before they reluctantly provided the title deeds.

Get your title deeds as soon as you can!!! The bank will try to hold on but just get it.

They will show you no mercy if you fall behind with any other debt...