The final repayment on your home loan is a long-awaited victory 20 to 30 years in the making. But, while most have us have been dreaming about this day from our very first repayment, most of us fail to consider what will happen thereafter.
According to Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, homeowners have one of two choices to make: either make the last repayment and close the home loan facility or continue to pay a monthly admin fee in order to keep the home loan facility open as a readily available line of emergency credit.
“The interest charged on a home loan is often lower than the interest charged on any other form of debt, such as credit cards or short-term loans. Some therefore choose to keep their home loan facility open in order to have access to the funds should they come to need it at a later stage in life,” Goslett explains.
To further outline the options homeowners have available to them at this stage in their home loan, Mary Lindemann, COO of BetterBond, national home loans originator, explains that homeowners can close the home loan account for a cancellation fee of around R4 000, after which the bank will release the property title deed to the homeowner.
“The other option is to keep the account open and, if you don’t already have one, add an access facility to the account that will allow you access to the original home loan amount that you were granted. This offers some peace of mind, provided that the facility is vigilantly managed and any amount that you ‘re-borrow’ is repaid as soon as possible,” Lindemann advises.
In terms of the process to follow, Lindemann explains that homeowners need to let their bank know of their intention to either keep the home loan facility open or to close it before they make the final repayment.
Consequently, Goslett recommends that homeowners start weighing up their options around this decision long before their final statement arrives.
“This is not a straightforward decision to reach. I would recommend that homeowners take the time to work through the various pros and cons of each option before arriving at a final decision. Speak to your bank to find out about the various costs involved and consult a financial planner to get some professional advice on the way forward,” he says.
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