If you would
like to receive
Early Termination Interest
On average, a home loan is granted for say 20 years. When you intend to sell, it means you wish to settle the full outstanding balance of the loan in one amount prior to the settlement date in your home loan agreement. Each bank has certain provisions in this regard, stipulated in the terms and conditions of the bank for the home loan agreement you signed at the attorneys when you purchased your home.
Although provisions vary from bank to bank, the following conditions generally apply as stipulated in the Usury Act: If your bond has been running for less than 3 years, as it takes 3 years for the loan to become profitable to the bank, you are required to give 90 days notice in writing of your intention to settle the bond (intention to sell your property). That notice may not be given before the expiry of 90 days from the date on which the loan was registered. Thus from registration 90 days have to lapse after registration after which a 90 day notice can be given.
This allows the bank to recoup some of the origination costs (money paid to an intermediary for securing the loan) as a result of the potential interest income that will be lost. Note that the early termination fee is not a penalty imposed by the bank, but a recovery of interest income, which is specifically provided for in legislation. Home loans with a fixed or capped interest rate will draw an early termination fee if cancelled before the end of the fixed period, even if running for more than 3 years.
Early termination interest will not apply to bonds registered before 1 October 2001 with a variable interest rate nor to accounts where the client has given 90 days notice. After the notice has been given, the seller has 6 months (180 days) in which to settle the bond (i.e. for the house to be registered in a new buyer’s name). Notice can be cancelled at any time. Notice is deemed given when either an attorney requests cancellation figures or if a client has given written notice to the bank that they wish to cancel the bond.
90 Days interest is calculated on the outstanding balance at day of notice. The provisional figure is added to the outstanding balance together with other allowances such as insurance and admin fees, etc. On final cancellation, the unexpired portion of 90 days interest will be charged and debited to the bond account, and will be due by the bond holder.
Should the client take out a new bond with the bank within 6 months of settling the previous home loan account, the client needs to advise the cancellation department of the new account number, to be considered for a refund, payable on registration of the new bond. Note that notice cannot be given by an estate agent as the relationship is directly between the bank and their client (you).
Thus to avoid early termination, ensure that you give 90 days notice, even before you find a buyer!
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Real Estate in Centurion.
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