Purchasing a new home is exciting and comes with a huge responsibility. It’s important to do thorough research upon buying or planning on purchasing a new home. Many will find that they want to cancel their bond because of circumstances. Read more to find out how to avoid bond cancellation fees.
To begin the process of your cancelling your bond, a 90 day written notice of your plan to terminate your bond must be submitted to the bank. The National Credit Act permits banks to charge a penalty fee when you cancel your bond before the period ends.
If you want to cancel your bond within a year or two of the loan agreement, you will liable to pay 1% penalty of the amount owing of the bond. Fortunately, these fees do not have to paid immediately. This penalty will be applied once your house is sold and will be deducted from the proceeds of the sale.
It’s important to make a mental note that the 90 day written notice does not mean that your bond has been cancelled automatically. A bond is only cancelled once your conveyancer has requested the final figures from the bank. This will happen only after the property is sold.
It is best to submit your intent to cancel your bond before you put your property on the market. If your property is not sold within the 90 days, you will have to resubmit your cancellation. The notice period will also be extended.
If you do not provide your cancellation notice, the bank will assume the date of the 90 day period to begin from the date that the conveyancer requests cancellation figures.
How can you avoid cancellation fees?
- If the property is sold within a deceased estate
- If the property has been sequestrated
- If another property is purchased and a new bond is taken out with the same bank
It’s important that you plan for a huge commitment like purchasing a property. Know beforehand you start paying for a bond whether you can afford it to avoid long processes.
Use our bond and transfer property calculator to start planning today!
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