Cancelling an Existing Bond

Cancelling an existing bond can take place simultaneously with a property transfer. Once the seller has sold the property, the proceeds will be used to pay off the outstanding loan amount and the bond against the property will be cancelled. Let’s take a look at the process that must be followed.

Notify your lending institution of your intention of cancelling an existing bond

The first step in cancelling an existing bond is notifying the lending institution of your decision to do so. 

This should be done in writing, so you have a record of your communication. The most effective approach to achieve this is to give instruction to the conveyancing attorneys serving on the cancellation panel for that particular bank to submit the request through the channels created just for that reason. After receiving the request, the bank will tell one of the panel attorneys to cancel the bond.

Contact us as soon as you start thinking of selling so we can advise you on the applicable notice period.

Take note of the notice period

It’s important to keep in mind that banks often need 90 days written notice before processing a bond cancellation when there are outstanding home loan balances, such as when a property is sold before the bond is paid up. Holders of bond accounts are responsible for any cancellation fees that may be paid if this time frame is cut short. Banks need to know how outstanding sums will be paid off in the event of an early settlement, such as through the sale of the homeowner’s home.

In the event that the bond is cancelled during the 90-day notice period, penalty interest might be charged on a pro rata basis, for the balance of the penalty period.

By way of example, in the event that 90 days’ notice is given and said bond is cancelled 30 days after issuing such notice, penalty interest will apply to the remaining 60 days. Should there be an overpayment to the bank, this will be refunded within a few days of registration.

The seller should provide written notice to the bank of his/her intention to cancel the bond. It is also good practice to notify the bank once instruction of transfer is received and the bond number is confirmed by the seller.

Cancel the bond with the deeds office 

Any existing bonds over a seller’s property must be cancelled at the Deeds Office for simultaneous transfer into the purchaser’s name. This is true even if there is no outstanding amount owed on the loan account. In these cases, there will still be a formal bond that needs to be cancelled at the Deeds Office. 

In order to cancel the existing bond, the transferring attorney will obtain the cancellation figures from the seller’s bank, and make sure that guarantees are issued to settle the balance upon registration. Cancellation of the existing bond by the seller’s bank will only be consented to, once these guarantees are received. 

Should you have any concerns about penalty interest being levied on your property transaction, please email andre@awdlaw.co.za with your bond account number. We will then request the cancellation figures, which will serve as notice of a seller’s intention to cancel his/her bond. The 90-day notice period will begin once this notification has been issued. Kindly be advised that the seller will not be able to access additional funds from his/her bond account once this notice is given or the cancellation figures are requested.

AWD Law serves on ABSA, FNB, and Nedbank’s cancellation panels. In the event that we are appointed to attend to the transfer of the property, we will apply for the cancellation from the seller’s bank and attend to the cancellation of the existing bond. Contact our office should you require any assistance to cancel your bond and we will notify the relevant bank accordingly.

Kindly be advised that AWD Law does not enter into litigation on behalf of clients. Our conveyancers specialise exclusively in the development of vacant land, property transfers, bond registrations, administration of deceased estates and notarial practice. Should you require assistance with a litigation, kindly contact The Legal Practice Council.