Absa says 20 percent of the title deeds it holds are for paid-off properties.
PERSONAL FINANCE
Hundreds of thousands of South Africans have bonds outstanding and this may still be costing them money.
Homeowners may not be aware that, in some cases, they will continue to be charged on their outstanding bonds unless they cancel the security deposit on the property and return the title deed to them.
READ: Personal Finance | Procrastination: money thief, start saving now rather than later
According to Absa, approximately 20% of the total titles held by the bank in storage are paid-up properties. Considering that there are more than 2 million housing loans across the country, it turns out that banks can keep around 400,000 title deeds for paid-off houses.
PAID SERVICE
Most banks, except Absa, continue to charge a service fee of R69 per month on a fully paid ordinary home loan account.
This is different from the credit facility fee charged to the access bond account holder, who pays a service fee to keep the credit facility available.
Even if the mortgage loan is paid, the title deed will continue to be kept securely in the bank until the customer instructs the bank to cancel the bond.
This requires an attorney to update the land office to remove the security deposit on the property and return the title to the homeowner.
The cost of this is at the customer’s expense and can be between R4 000 and R10 000.
READ: Making the home loan process less painful
According to Nedbank, the bond account will remain active but dormant unless the bond is cancelled. During this period Nedbank will continue to charge a monthly service fee of R69.
According to FNB, the account will remain open with a zero balance until the customer is ready to cancel or end the term.
This means that the monthly account fee (usually R69 per month) will continue to be charged depending on the customer’s contract.
Standard Bank confirmed that the bank will still need to charge a service fee for account maintenance as the account will remain active.
Absa is the only bank that does not charge fees.
Mary Motsuku, head of sales and service enablement at Absa Home Loans, said:
At Absa, we securely hold title to all paid-up bond accounts until instructed by our customer to cancel the account.
“This also applies if an account is paid off before the loan is due. If a customer in this position applies for a further advance on a home loan, the account will be removed from secure storage for the application to be processed.
“While the title deeds are kept in a secure warehouse, no monthly service fee or any other fee is charged from these accounts,” he added.
OTHER COSTS
Service fees are not the only costs that may be incurred. In many cases, insurance premiums may come out of the bond account. This may include life insurance or building insurance.
Nedbank’s statement is as follows:
It is important to note that if the client has insurance such as life insurance and homeowners insurance, these payments will still be deducted from the bond account, potentially resulting in interest charges on the loan.
“Without service (payment), eventually the debts will not be paid and will trigger the collection process,” Nedbank added.
READ: Home loan headache: Here’s how banks decide how much money to give you
Angela Glover, Head of Product for FNB Home and Structured Credit Solutions, says that if a customer has credit life insurance that covers the outstanding loan amount, the premium will also drop to zero as the outstanding balance is zero.
He said:
However, in the case of home insurance (building insurance), premium deductions will continue from the home loan account until the debit order information is updated, the maturity date or the policy is cancelled. This may result in additional interest charges if the home loan is not maintained.
This means that a homeowner who believed he was debt-free may suddenly find himself with a demand letter for unpaid service charges and insurance premiums that he may not have realized he had.
“To avoid this scenario, it is recommended that the customer transfer the premium debt to the transaction account and cancel the mortgage loan.
“We are currently running a number of initiatives to educate customers on this and are also assisting customers with rising balances by helping to cancel bonds,” says Toni Anderson, head of Home Services at Standard Bank.
CANCEL
For some homeowners, forgetting to cancel the mortgage note may be an administrative oversight. But many hosts cannot afford the R4 000 to R10 000 fee that lawyers demand to cancel.
According to Glover, this is provided on a voluntary basis in some cases where FNB is notified of vulnerable customers who need assistance.
Standard Bank says they are running campaigns to help customers who cannot afford cancellation fees.
Anderson said:
In some cases we offer a discount on the cancellation fee.
However, if the unpaid wage and premium balance has increased significantly, these will also need to be closed.
Absa’s Motsuku said:
Although there are costs associated with this cancellation process, from time to time we assist some of our clients whose historical accounts are securely stored in retrieving their title deeds by co-sponsoring the cancellation costs with our lawyers.
Nedbank has confirmed they will offer help to pensioners and unemployed customers.
“When customers approach Nedbank for help, we negotiate discounts on their behalf. This could be particularly useful for low-income people who do not have around R5 000 to cancel the bond.”
WHAT SHOULD YOU DO WHEN YOU HAVE PAID YOUR MORTGAGE?
- Cancel insurance premiums or transfer them to your trading account.
- If you want to keep the account open, you can convert it into an access/flexible bond to access your prepaid funds.
- If you want to close the account, contact the bank regarding the cancellation.
- If you don’t have the money to cancel the mortgage, ask the bank for help.
