Beware the hidden costs of terminating your home loan

If you get to a point where you're able to pay off your home loan it's something to celebrate, but beware or 'be aware of' the hidden costs you're still liable for.

The other scenario leading you to cancel your bond would be where you still have an outstanding balance, but you've decided to sell the property.

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Wendy Knowler focuses on the former with her case study this week to illustrate the extent of those hidden fees and charges you may not be aware of.

"Most people only discover that they owe money - quite a lot of money - in fees when the time comes to cancel their bond. Who remembers what was in the contract Ts and Cs five, 10 or more years ago?"

Wendy Knowler, Consumer Journalist

Elana from Cape Town was horrified at the extent of the costs she was liable for when she recently paid off the home she'd financed through FNB (initially NBS) in the early 2000s.

“I was notified by the bank of the conclusion of the loan, and they sent me a form to complete with the heading "Bond Cancellation". I queried it, but they said it's a standard form."

Elana, Home loan client

"After completing the form, she got an invoice from a conveyancing attorney for R7 821, for fees including a consent fee of R3 160, a document generation fee of R600 and a deeds office fee of R318."

Wendy Knowler, Consumer Journalist

Regarding those attorney's fees, Knowler says it's likely that a bank works with a panel of attorneys, so ask it to arrange for at least three quotes.

Also be aware that some  banks charge early termination fees on their home loans.

In that case you might face a penalty charge equal to 90 days’ interest on the remaining loan amount, as provided for by the National Credit Act.

Query your bank’s policy, Knowler advises, so that you don’t end up paying that interest on your outstanding bond amount because you failed to give them three months’ notice.

The same early cancellation penalty can apply when you settle your car loan early, she warns.

To hear more detail, listen to the interview audio at the top of the article