Why tell the bank early?
Most South African banks expect 90 days’ written notice before you cancel your home loan. If you cancel sooner, they can charge an early termination fee (often called “90-day penalty interest”). The fee is essentially up to three months’ interest on your outstanding balance, and it reduces day-by-day as your notice period runs down. If your bond is cancelled after day 90, the early termination feeq is R0.
Legally, this sits under section 125 of the National Credit Act, which lets a credit provider levy an early termination charge within clear limits. In practice, banks implement it as “up to 90 days’ interest, less the notice you actually gave.”
What counts as “notice” and when should you give it?
Form: Send written notice to your bank’s home-loans department (email/portal/branch instruction). Keep proof.
When: As soon as you decide to sell—you do not need a buyer yet. This lets your 90-day clock run while marketing and transfers happen.
If your sale registers before day 90: you’ll pay a pro-rata portion (e.g., cancel on day 60 → roughly 30 days of interest).
If your property hasn’t sold by day 90: some banks require you to renew the notice so the clock keeps running. Check your bank’s rule.
What actually happens after notice?
1. Bank logs your notice and starts the 90-day clock.
2. Once there’s a signed offer, the bank appoints a cancellation attorney and issues cancellation figures to the transferring attorney. You, the seller, pay the cancellation attorney’s fee. (Some lenders/new lenders run promos to cover that fee, but not your early termination fee.)
3. Access bonds: when cancellation figures are issued, most banks freeze your access facility. Don’t rely on drawing those funds after this point.
4. You keep paying your monthly instalment and insurance until registration day. Then the bond is cancelled at the Deeds Office and your loan closes. Typical cancellation timeline once attorneys start is ±1–2 months.
Quick example (illustrative)
Outstanding balance R1,000,000 at 11% interest when you give notice.
Full 90-day fee ≈ 90/365 × 11% × R1,000,000 ≈ R27,123.
If transfer registers on day 75, fee reduces to remaining 15 days ≈ R4,520.
If it registers on/after day 90, no early termination fee. (Your bank still charges normal daily interest up to settlement day.)
Common ways to reduce or avoid the penalty
Start notice early (ideally before listing). If transfer happens after day 90, the fee is waived.
Ask your conveyancer to target registration after day 90 if you’re close—sometimes a minor lodgement timing tweak helps.
Exceptions: many banks waive early termination fees for deceased estates and sequestrations, and some waive it if you take a new bond with the same bank (policy-dependent). Note that FNB currently advertises no early termination charges on cancellations—but always confirm current policy in writing.
Switching banks (bond switch): the 90-day rule still applies; some new lenders cover cancellation attorney costs but not your early termination fee.
Other costs to expect (separate from the penalty)
Cancellation attorney fee (you pay; set by tariff/firm).
Bank admin fee for issuing cancellation figures.
Normal interest up to the settlement date.
These are standard across banks when a bond is cancelled via transfer.
Pitfalls to avoid
Waiting for a buyer before giving notice → compresses timelines and often triggers most of the fee.
Assuming “paid up” = “cancelled” → a formal Deeds Office cancellation is still required.
Planning around access-bond funds → those are typically frozen once figures are issued. Move any needed cash before that stage (without jeopardising settlement).
Fixed-rate loans: separate breakage fees can apply if you exit during the fixed period—this is contractual and in addition to the 90-day framework. Check your fixed-rate addendum.
Lake Properties Pro-Tip
Give written notice the day you decide to sell and diarise the 90-day date. Ask your conveyancer to aim registration for on/after day 90 if timing is tight, and confirm in writing with your bank whether any waivers apply (deceased estate, sequestration, or same-bank rebond). If you have an access bond, move any funds you’ll need before cancellation figures are requested so you’re not caught by a frozen facility.
If you know of anyone who is thinking of selling or buying property,in Cape Town,please call me
Russell
Lake Properties
www.lakeproperties.co.za info@lakeproperties.co.za
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