Settling the balance is not the finish line; the bond must be cancelled before you transfer or refinance. We handle notice, figures, and lodgement so the mortgage falls away on cue.
Where there is a linked transfer and new bond registration
1. Seller Notifies Financial Institution of Their Intention to Cancel
- The seller will give notice to the home loans department of the financial institution ('the bank') in favour of which the bond is registered.
- Standard practice is that the bank requires a 90-day waiting period prior to the bond being formally cancelled at the Deeds Office.
- The bank will provide the seller with the date on which the 90 days will lapse.
- If the full 90 days have not lapsed by the time the cancellation is registered, there may be penalty interest payable by the seller to the financial institution.
2. Attorney Instructed
- The bank will instruct an attorney on their panel to attend to the bond cancellation.
3. Cancellation Figures Received
- The bank will provide the bond cancellation attorney ('cancellation attorney') with cancellation figures on the home loan account with a provision for interest to be charged on the amount owing should the bond not be cancelled by the date provided by the bank.
- The seller will have to provide their home loan account number for the figures to be shared with the instructed attorney.
- Generally, this is done electronically via conveyancing software.
4. Cancellation Figures Shared with Transfer Attorneys
- Bond cancellation figures will be sent to the transfer attorneys.
- The transfer attorney will ensure that there are sufficient funds from the purchase price to cover what is owing to the bank (and other costs e.g the estate agents commission).
- The transfer attorney will use this information to advise the bond attorney how the proceeds of the new bond to be registered over the property are to be paid out on registration.
5. Bond Attorney will Provide a Bank Guarantee for the Outstanding Amount on the Home Loan
- Once the purchasers have signed the home loan and bond registration documents with the bond attorney, the bond attorney is authorised by the bank to issue bank guarantees for the proceeds of the home loan. The bank guarantees will then be furnished to the transfer attorneys.
- Typically, there will be a guarantee in favour of the existing home loan account which guarantees that it will be settled on registration of the transactions at the Deeds Office (see deeds office process for more information).
6. Cancellation Attorney Receives Bank Guarantee
- The transfer attorney will send the guarantee in favour of the existing home loan account to the cancellation attorney.
- The cancellation attorney will check the guarantee to ensure that it is correct and acceptable, this is to ensure that there will be no issues or delays with payment.
- Depending on the bank, the documents must be sent to the bank for approval or "proceed to lodge" prior to lodging at the Deeds Office.
- Bond cancellation will be lodged simultaneously with the transfer and the new bond.
Common Misconception
That settling (paying up) the home loan is the same as cancelling the bond registered over the property. As explained above, there is a formal cancellation process that needs to be followed where it is the intention of the seller to cancel the bond registered over the property.
If the property over which the bond is registered is being sold, it is compulsory for the bond to be cancelled.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
