Why do you need to inform the bank of your intention of cancelling your bond

Lake Properties                      Lake Properties

Lake Properties                      Lake Properties

Let’s break it down in full detail so you clearly understand why it's important to notify the bank when you intend to cancel your bond in South Africa — and what happens if you don’t.

---

🔑 What is Bond Cancellation?

When you take a home loan (bond), the property is used as security for the bank. When you:

• Sell your property, or
• Pay off your loan in full,

you must cancel the bond registered over the property at the Deeds Office. This process can only happen with the bank’s involvement, and that’s why you must formally notify them.

---

🔔 Why You Must Inform the Bank (Full Explanation)

1. 🕒 90-Day Written Notice Requirement (Very Important)

Banks (like Absa, Standard Bank, FNB, Nedbank, etc.) have a policy that requires you to give 90 days’ written notice before cancelling your bond. This is in line with the National Credit Act and your loan agreement.

• If you don’t give notice, the bank will likely charge a penalty fee — typically up to 3 months’ worth of interest on your outstanding balance.
• If you give early notice, even if the sale is delayed, you can avoid or reduce the penalty.

✅ Tip: You can give the bank early notice as soon as you list your property for sale.

---

2. 🧾 Settlement Figures Must Be Calculated

Once the bank is notified:

• They prepare a bond cancellation statement, which includes:
  • Remaining capital
  • Interest up to the cancellation date
  • Administrative charges
  • Any unpaid fees (e.g., insurance, service fees)

This allows:

• The bond cancellation attorneys to pay off the bond in full from the proceeds of the sale.
• A clear and smooth transfer process between seller and buyer.

---

3. ⚖️ Bond Cancellation Is a Legal Process

Even if you pay off the loan in full, the bond does not cancel automatically. It must be formally cancelled at the Deeds Office.

• The bank must instruct their appointed bond cancellation attorneys.
• These attorneys work with the transferring attorneys to lodge the cancellation and transfer documents at the Deeds Office.
• Only once this is done is the bank’s claim to the property removed.

---

4. 🧷 The Bank Holds Your Title Deed

In bonded properties:

• The bank holds the original title deed.
• They will only release it once the bond is fully settled and cancellation has been registered.

This is essential to:

• Finalize a sale (if selling)
• Register the property in your name without the bond (if settling the loan)

---

5. 💼 Necessary for Property Transfer

The bank’s consent to cancellation is part of the required documents during a property sale.

If you’re selling:

• The bank must release the bond so the buyer’s attorneys can register the new owner.
• If you don’t involve the bank in time, the transfer will be delayed and you may breach the sale agreement.

---

🔚 Summary of What Happens When You Notify the Bank

Step	Action
1	You send written notice of intent to cancel bond
2	Bank issues a settlement figure
3	Bank appoints cancellation attorney
4	Attorney works with transferring attorney
5	Bond is cancelled at Deeds Office
6	Title deed is released / transferred to buyer

---

📬 How to Notify the Bank

• Send a formal letter or email stating your intent to cancel the bond.
• Include:
  • Your full name and ID
  • Bond account number
  • Property address
  • Intended cancellation date
• Request a settlement statement and bond cancellation instructions.

Lake Properties                      Lake Properties