Home owners note…

29 01 2010

I purchased my home four years ago, receiving guidance from the bank throughout the process. Unfortunately I’m on my own now that I’m in the market to sell.  So for all those first time SELLERS out there, I’m going to keep you in loop as make my way through this uncharted territory.

You need to give your bank notice that you’re planning to sell your house

This article by Brennan Carey on Property Tribe is useful:

For those property owners that are wanting to sell their properties the odds are that you have a mortgage on that property with one of the banks. When a seller sells their property the existing mortgage needs to be canceled on transfer and the seller is responsible for payment thereof. Most sellers are unaware  that you need to give your bank notice of your intent to sell and therefore cancel your homeloan.

If you cancel your homeloan/bond within the first 2 years of your mortage you will be liable to pay penalty interest of about 1% of the outstanding bond amount. If you owe R500 000 that’s about R5000 in early cancellation penalty fees and on a R1 million bond thats R10 000 in penalties that you will need to pay which will come off your proceeds of the sale.

This cost can normally be avoided by giving the bank 90 days notice of your intent to cancel the bond. So what this means is that you need to fax a written letter or email to your bank before you even put your home on the market. Most estate agents will not tell you this but it is an important step to take when selling your property.

The 90-day notice period will only waived under the following conditions:

  1. If its a deceased estate.
  2. If you are been sequestrated.
  3. If you are buying a new property and taking out a new bond is with the same bank.

Many sellers get confused thinking that by giving the bank 90 days notice that they are cancelling their bond in 90 days. This is NOT the case, in that if your house does not sell within that period you just need to renew your intent letter but your bond will not be cancelled until such time as the conveyancers request for cancellation figures from your bank and the conveyancers will only do this once your property has been conclusively sold and they have received all the necessary guarantees.

Click  here for a free copy of such a letter which you should send to your bank to notify them of your intent to cancel your home loan.