In South Africa, the cancellation of a mortgage bond is a procedure commonly encountered when a property changes ownership or when the bond is fully repaid. This process is complex, involving several crucial steps that must be meticulously followed to ensure a smooth transition of property ownership and financial obligations. 

The Formal Process 

The initial step in cancelling a mortgage bond involves the property owner submitting a notice of intent to cancel the bond to the lending institution. Typically, this notice must be provided at least 90 days in advance in writing. However, certain exceptions exist where penalty fees for failing to provide notice may be waived. These exceptions include scenarios where the property forms part of a deceased estate, a sequestrated estate, or if a new bond is being acquired from the same institution. Additionally, your bank reserves the right to impose an early cancellation penalty fee in accordance with the National Credit Act. 

Following the submission of the notice, the property owner should engage a conveyancing attorney to request cancellation figures from the lending institution. These figures encompass the 90 days' interest, the month-end balance before cancellation, the next six months' home and credit life insurance premiums, penalty fees, and legal expenses. 

Once the cancellation figures are obtained, the next step is to settle all outstanding amounts. Typically, this settlement is funded from the proceeds of the property sale.  

It is important to note that from the date the settlement figures are issued until the bond is officially cancelled, the lending institution may continue to charge interest on the outstanding balance. Additionally, any insurance premiums debited from the home loan account should be transferred to a separate account to ensure uninterrupted coverage after bond cancellation. Moreover, the conveyancing attorney oversees the payment of cancellation fees, which primarily consist of costs associated with the Deeds Office process and administrative fees, and these are the responsibility of the seller or bondholder. 

Upon settlement of all financial obligations, including outstanding amounts and necessary fees, the lending institution issues a bond cancellation certificate. This certificate holds significant importance as it formally signifies that the bond against the property has been fully settled, with no remaining debts. 

Subsequently, the bond cancellation must be registered with the South African Deeds Office, a task typically managed by the conveyancing attorney.  

Upon the successful registration of the bond cancellation, confirmation of the finalized process is provided to either the homeowner or the new property owner in the case of a sale. 

Conclusion  

The process of terminating a mortgage bond in South Africa follows a detailed and organized approach, beginning with the notification of the intent and concluding with the formal removal of the bond from the property's title deed. This thorough process is essential to facilitate the seamless transition of property ownership and to ensure that the homeowner fulfils their financial responsibilities, thereby preserving the integrity of property transactions and ownership in South Africa. 

Written by Robyn Shepherd, SchoemanLaw