Bonded for life?

There are few things in life as satisfying as making the very last payment on your home loan. For many people it's the longest financial commitment they ever make, spanning some 20 years. 

But there are a couple of points to take note of as your bond period comes to an end, and in fact you may want to consider not closing the bond account at all. Seasoned property advisor and principal at Leapfrog Johannesburg North East, Michelle Cohen says the first point to note about a bond is that the account doesn't automatically close once the last payment has been made. 

The end is not the end

Even after the last repayment is made, the bond account doesn't automatically close. "The bond holder has to instruct the bank (or mortgagee) to close the account and it is preferable to give your bank 90 days notice of your intention to cancel in order to avoid paying a penalty on the bond cancellation over and above the bond cancellation fee," Cohen explains. 

She adds that while the process may differ slightly from bank to bank, a cancellation attorney will be instructed by the bondholder to cancel the bond at the deeds office for which a cancellation fee will be payable. 

Next a cancellation letter will be drawn up by the attorney and lodged at the deeds office. This will be done together with the original title deeds and proof of the paid-up bond. The Registrar at the Deeds Office will place an endorsement in the title deed to prove that the bond has been settled in full and thus cancelled. Once this is done the bank can cancel the bond and the title deeds will be handed over to the registered owner. Only when your bond has been paid in full do you have the option of getting the title deeds from the bank.

"And then you make sure to store those title deeds in a very safe place," Cohen quips "so that when you decide to sell your house those title deeds are available for the transfer to the new owner".

Easily accessible credit 

But you may want to consider not cancelling your bond at all. "The reason for this is simply that it offers a form of easily accessible and affordable credit, should you need it," Cohen says. "It is also advisable to keep a small amount of the bond open and to ensure that you have your building insurance on the structure of the property in place even after your bond is paid up."

There is no obligation to close the bond account, as long as you keep paying the bank fees to keep the account open. The fees are generally quite low, particularly if you consider the amount of credit it potentially gives you access to.

Cohen says the decision around whether to maintain this facility tends to be influenced by the individual's financial position and personal preference. Each case will thus be different and individuals are advised to check the term and conditions with their bank