Selling your property or settling your home loan early can come with unexpected costs if you're not aware of the intricacies involved. One such cost is the "Early Termination" penalty fee that many homeowners might unknowingly face. To help you steer clear of these fees and keep more of your hard-earned money, let's delve into the details and explore how you can avoid them.
Understanding Early Termination: What You Need to Know"Early Termination" refers to the situation where you settle your home loan before its final installment due date, either by selling your property or paying off the loan in one lump sum. However, here's the catch: if you cancel the loan early without providing your bank with a 90-day written notice of your intention to terminate the bond, you'll be subject to a penalty fee.
This penalty fee amounts to three months' interest, calculated based on the outstanding balance of your loan, the applicable interest rate, and the remaining loan term. These fees can swiftly accumulate, catching homeowners off guard.
Steering Clear of Early Termination FeesThe key to avoiding these fees lies in proactive communication with your bank. When selling your property, ensure that your bank receives a 90-day written notice of your intention to sell, settle, or cancel the home loan. While this notice is typically provided by the attorneys overseeing the property transfer, it's advisable to confirm that it's in order.
Should you find yourself in the fortunate position of being able to pay off your home loan early, the same 90-day notice period applies. In cases where you're using funds from lottery winnings, pension payouts, or inheritance to settle your loan, remember that you hold the responsibility of giving the bank adequate notice.
Taking Action: Contacting Your BankIf you're looking to cancel your bond at one of the major banks, here are the contact details you'll need:
When contacting your bank, ensure you have your bond account number and personal details on hand, and remember to quote them in any written correspondence. Keep records of your bank's acceptance of your notice, as it can serve as evidence in case of disputes.
Additional Considerations and Reminders
If you're cancelling your bond independently of selling your property, you'll be appointed cancellation attorneys by the bank. They'll liaise with you to arrange payment and provide details of the outstanding amount, including capital, interest, and potentially insurance.
Be prepared for a separate fee charged by the cancellation attorney, which is unavoidable when cancelling a bond. This fee is separate from the payment to the bank.
Also, bear in mind that the notice you provide is usually valid for a period between 3 months and 1 year, depending on your bank's policy. Beyond this timeframe, you may need to give notice again to prevent Early Termination Penalties.
Lastly, if you've paid off your bond and wish to keep your Access Facility open, ensure you transact on the account every 6 months to maintain access to the funds.
By understanding the nuances of Early Termination fees and taking proactive steps to communicate with your bank, you can sidestep unnecessary costs and make the most of your property ownership journey.
