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Let’s break down the difference between bond settlement and bond cancellation in a more detailed and practical way, especially in the South African property context:
πΉ 1. What is Bond Settlement?
✅ Definition:
Bond settlement is the financial act of paying off your outstanding home loan (bond) in full. This usually happens when:
- You sell your property.
- You decide to switch (refinance) your bond to another bank.
- You want to be completely debt-free on your property.
π¦ How it works:
-
You ask your bank for a settlement figure. This amount includes:
- The outstanding capital on your home loan.
- Any accrued interest up to the settlement date.
- Penalty interest if you didn’t give the required notice (usually 90 days).
- Admin fees.
-
The settlement amount is paid:
- From the proceeds of the sale of the property (by the transferring attorney).
- Or by you directly, if you’re settling the bond without selling.
π‘ Important Notes:
- Settlement is just paying the debt.
- The bond is still registered against the property until formally cancelled.
πΉ 2. What is Bond Cancellation?
✅ Definition:
Bond cancellation is the legal process of removing the bond (mortgage) from the property’s title deed at the Deeds Office.
π️ How it works:
- Once the bond is fully settled, the bank appoints a bond cancellation attorney.
- This attorney prepares documents to deregister the bond from the Deeds Office.
- The cancellation attorney works with the transferring attorney (if there’s a sale involved).
π Documents involved:
- Consent to cancellation from the bank.
- Proof that the bond has been settled.
- Other legal paperwork required by the Deeds Office.
πΈ Costs:
- There are bond cancellation attorney fees (set by tariff).
- These are usually paid by the seller, if the cancellation is part of a property sale.
π Timeframe:
- The bond cancellation process can take a few weeks.
- Giving 90 days’ notice to the bank helps avoid early termination penalties.
π§Ύ Example Scenario:
You're selling your house:
- You notify the bank you're planning to cancel your bond.
- The bank gives a settlement amount.
- The transferring attorney ensures this amount is paid from the buyer’s funds.
- A bond cancellation attorney is appointed by the bank to handle the legal cancellation.
- After registration at the Deeds Office, the bond is officially removed from the property.
πΈ Key Differences Recap:
Aspect | Bond Settlement | Bond Cancellation |
---|---|---|
Main Purpose | Paying off your home loan | Removing the bond from the title deed |
Type of Process | Financial | Legal / Administrative |
Who Handles It | You / Transferring attorney | Bank-appointed bond cancellation attorney |
Timing | When the debt is paid (e.g. after sale) | After the bond is fully paid |
Costs | Includes loan balance, interest, penalties | Includes cancellation attorney fees |
Involves Deeds Office? | No | Yes |
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