Although the monthly installment on a bond that is nearly paid up is usually minimal and probably isn’t going to make much of a difference to your pocket once the mortgage is cleared, this doesn’t detract from the absolute joy you feel knowing that your home is yours, free and clear.
The big question is, of course, do you keep that bond account open or do you close it once everything has been paid? Many elect to keep the account open and continue to pay the bank fees and insurance policy, if applicable. Don’t assume that the account will automatically close once the final payment has been made! Unfortunately this is not the case and unless the bank receives instructions to the contrary, it will leave the account open and will charge a fee for the service.
It’s vital to remember that banks still charge a bond cancellation fee even if the bond is fully paid. A fee of around R3 000 will be payable to the bank’s attorneys. If you opt to cancel the bond, the bank will draft instructions to its cancellation attorneys and will send the original title deed and the mortgage bond to its lawyers. In turn, the attorney will draw up a cancellation letter and lodge it, together with the original title deed and mortgage bond, at the Deeds Office. The Registrar of Deeds will place an endorsement in the title deed which serves as proof that the bond has been paid in full and has been cancelled. The bank will only cancel the bond once these steps have been taken.
Easy, cheap credit
While many homeowners object to paying for something they no longer need, there are some very good reasons for keeping a home loan account open. Firstly it affords you access to relatively easy, cheap credit. Generally speaking it will also be easier and faster for you to secure a new bond. If however you decide to close the account and elect to buy another property in the future, you will have to apply for a new home loan, jump through all the hoops and pay all the registration fees again.
Most of us assume that we will put the money that we were paying on the bond to one side once the home loan has been fully paid. While this looks terrific on paper, the reality of the situation is often different. We all have to face the unexpected at times and it pays to remember that homes, yes even those that are fully paid for, need to be maintained. Again, having access to easy finance when major repairs need to be carried out can prove to be a lifesaver.
While it may be assumed that all the major banks charge a monthly fee for maintaining a fully paid-up home loan account, this doesn’t appear to be the case. It’s highly recommended that you contact your bank in order to ascertain what the monthly fees will be before coming to a decision on whether or not to close your account.