Can you still sell your home if you have a home loan?

You're ready to sell your home and move on to the next chapter of your life. But what about that lingering home loan? Can you still sell and make a smooth transition while owing the bank or other financial provider? The short answer is yes, you absolutely can! Selling your home while carrying a mortgage is not only possible but quite common. In fact, many homeowners find themselves in this exact situation, whether they're looking to upgrade, downsize, or relocate. Before you stress, our guide will help you make a successful sale. 

Know when to consider selling

Even though most home loans are provided over a period of twenty to thirty years, people usually sell at the ten-year mark. Because there can be costs associated with cancelling your bond and selling your home, you should sell only when it's the best time to do so. Keep these questions in mind:

• Have you built enough equity so you can overcome selling costs?
• Will you be selling in a seller's market where demand will drive up the price of your home?
• Do you have a good reason to sell? For example, a change in family dynamics, financial need, relocation, or lifestyle changes.
• Are you financially stable enough for a potentially higher bond? Or prepared in case your new home needs expensive upgrades or upkeep?
• Are you emotionally ready to say goodbye to your home and get through the process of selling your home?

Factor in bond cancellation costs

As a seller, there are several costs involved with selling, including clearance certificates, rates, taxes, levies, property practitioner fees, repairs, and maintenance. 

With an existing bond, you will also need to notify your bank as they require 90 days written notice or be liable to pay an early termination fee. Also known as a 90-day notice, this is prescribed by the National Credit Act and allows banks to charge a fee when a client cancels their home loan before the agreed-upon loan period. This early termination fee is determined as three months' interest and calculated based on your outstanding balance, interest rate, service fees, and any insurance premiums from your loan.

If your bond is relatively new, you may also have to pay roughly 1% of the amount owing if you choose to cancel within two years or less. However, as property is an appreciating asset, there's a good chance you can cover bond cancellation costs and still have enough cash to put towards your next property or investment. 

Understand the bond cancellation process

When you're ready to cancel your bond, here's a simplified look at the process you'll follow:

1. First, you will give your bank or bond provider a 90-day notice of cancellation. While this can be done telephonically, it's best to send a written confirmation by email in case the date of the notice is disputed.

2. Your bank will calculate the cancellation fees and issue this to their cancellation attorney together with the bond document and title deed to start the cancellation process. 

3. Your bond cancellation attorney will liaise with the bank's attorney to attend to any outstanding capital and fees to settle the account. 

4. The title deed and bond documents will be sent to your bond cancellation attorney. 

5. Your attorney will request guarantees to settle the amounts. These guarantees are issued to ensure that there are funds available to cover the bond on the date of cancellation of the bond in the Deeds Office. 

6. You will then sign and give consent for the bond to be cancelled after reviewing the guarantees.

During the period it takes to transfer your property after it is sold, you should still keep making monthly bond payments. While banks will usually make provision for three months' worth of payments in the cancellation figure, you could be listed as a defaulter if the transfer takes longer than expected. 

Talk to your home loan provider 

Savvy sellers should also enquire about the services offered by their banks to make the sales process easier. For example, at Nedbank, you will not have to pay early termination fees when selling your home bonded with Nedbank provided you refinance your new home with them again.

You can also look into property bridging, a short-term loan that is based on the anticipated proceeds from the sale of your house. This provides instant, accessible funding with no restrictions on what you can use the cash for. It offers great financial relief, especially if you need to cover any expenses before the proceeds of the sale are approved.

Make the sale work to your advantage

With an experienced seller agent, you will have a helping hand during the bond cancellation process. From ensuring you set the right asking price, marketing your home, to liaising with the bond cancellation attorney, these property practitioners are worth their weight in gold. Get in touch with Kellaprince Properties to list your home in Mbombela (Nelspruit) and surrounding Lowveld areas today.