Sellers of homes – beware

Anton du Plessis, CEO of Vineyard Estates, has pointed out that regardless of how small the balance owing on the mortgage bond might be, if the seller does not give the bank three months’ notice of his intention to cancel his bond, they are entitled to and are very often charging him with the full interest payments that would have been paid for the balance of the three month notice period? This used to only apply to a bond that was being unexpectedly paid off within three years of the bond having been issued, but in the current tight banking environment, banks are now less willing to turn a blind eye to this standard clause.

“This,” said du Plessis, “means that, supposing the seller had a R3 million bond on which R100 000 was still owing, the bank could still hit him for R71 000 in “lost” interest payments.”

It is, therefore, advisable as soon as you decide to put your home on the market, to inform your bank that you intend to settle the bond early. Even if you were to advise your bank immediately upon marketing, in certain cases a really fast sale and transfer can be concluded in five weeks. This would leave you with seven weeks worth of payments to the bank on money that you have already paid back. Obviously, one needs to scrutinise each individual bond contract to see whether or not this clause is included. It is also advisable to negotiate a waiver of this clause if one is to take up another bond with the same bank on an onward property purchase.

Du Plessis also pointed out that certain people are paying double structural insurance on their homes because the policy that they have with their broker is duplicated by one that the bank issuing their bond has taken out.

“Many thousands of rands have been wasted this way,” said du Plessis, “but the good news is that if you discover that you have double coverage, you are entitled to claim back your payments on the bank’s insurance in full.”

To go about this, he said, consult your broker, and forward documentary proof to the bank.

Du Plessis also warned that when some people finish paying their bonds they forget that their homes now have no structural insurance – the insurance ends when the bond is paid up.

“This,” he said, “has caused real hardship in one or two cases where fire or storms damaged a property.”

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