Page 69 - Q&A

What to do when you settle your home loan

February 2020
“After nearly 20 years I’m finally at the point where I’ve just about repaid my
home loan. This has me wondering though, what happens or what I should do
when I pay the final instalment?”

The first thing to do after you pay your final instalment to the bank is open a
bottle of champagne and celebrate your home being fully yours! Once the
important celebrations are finalised, you can move on to consider your options.

It must be noted that your home loan (or mortgage) will not automatically
be cancelled just because you have paid the final instalment. This leaves you
with two options:

1. Keep your home loan account with the bank open; or
2. Cancel the home loan account with the bank.

Many choose to keep their home loan accounts open as they can still continue Property
to use and draw from their flexi-account facility linked to their home loan. The
advantage of keeping your home loan account open is that you will not have
to incur further costs to register another bond over the property as security
should you wish to take a further loan from the bank for example to fund house
renovations. You will still need to pay the monthly administration costs of the
bank and your insurance policy and of course, if you loan money, you will need
to monthly pay back the new loan. Also note that the bank will keep the title
deed to your house as security until the home loan is cancelled.
If you would rather part ways with the bank and cancel your home loan
account, the following steps should be followed:

Firstly, you must give the bank written notice of your intention to cancel the home
loan. Usually a period of 90 days is required. The bank will then send instructions
to their cancellation attorney to assist them with cancelling the home loan
at the Deeds Office. If you fail to notify the bank within the abovementioned
three-month period of the cancellation of your home loan, additional charges
could be added to your settlement statement.

Secondly, the cancellation attorney will provide you with a settlement statement
containing your cancellation figures. The cancellation figures are made up
of the settlement amount and approximately six months of life insurance
premiums in advance so that provision is made for the cancellation process
to be finalised. In case of early termination, an early termination penalty may
also be added to the cancellation figures. Once the cancellation figures are
paid, the cancellation attorney lodges a consent to cancel your home loan at
the Deeds Office. On date of registration at the Deeds Office, your home loan is
officially cancelled and the account with the bank is closed.

62