We wish that all things in life were as simple as signing on the dotted line and that being the end of the story. Unfortunately, that is rarely the case, particularly when it comes to buying or selling a home. One example requires careful attention is when you need to transfer a home loan.

Whether you are transferring your home loan due to selling your property, a change in personal circumstances such as a divorce, or refinancing, understanding the step-by-step process will help you navigate this procedure with confidence. More importantly, having a firm grasp on the ins and outs could prevent you from landing up with unnecessary expenses or encountering legal issues later on.

Let’s unpack what it means to transfer a home loan for the average South African.

Step 1: Inform Your Lender

The first step in transferring your home loan is potentially the easiest, in that all you need to do is notify your lender that you wish to do so. If you are the seller, you’ll need to first inform the bank of the sale and put in a request to cancel the loan on the property. In fact, even if you’re simply refinancing or transferring your home loan to another bank, you’ll need to notify the bank first.

At this stage, keep in mind that the lender, whether it be a bank or some other financial institution, might charge a home loan cancellation fee. This isn’t a standard amount and typically ranges from R3,000 to R5,000.

Step 2: Engage With Conveyancers

Now it’s time to get legal. For this step, you need to involve the conveyancers, who are attorneys specialising in property law. Both the buyer and seller will have separate conveyancers. If you are the buyer, and your offer to purchase has been accepted, your conveyancer will initiate the home loan transfer process and make sure that all your legal requirements are met. This includes drafting all the necessary documents, as well as ensuring compliance with the Deeds Office, and securing payments for transfer duties.

Step 3: Obtain A Settlement Figure

In this step, you’ll go back to the bank responsible for the existing home loan to get the settlement figure. The settlement figure is simply the outstanding amount on the loan and tends to include any additional costs, like that early cancellation fee we mentioned.

If you are the homeowner, then please note that you must provide 90 days’ notice to your lender if you intend to settle the home loan. If you don’t do this within this timeframe, you could end up paying additional interest charges.

Step 4: Home loan Registration (New Lender)

Let’s say that you are transferring the home loan to another lender. In this case, the new bank will need to register the loan at the Deeds Office, which is vital as it ensures that the home loan is officially recorded against the property title. It’s also during this step that a new loan agreement will be drawn up, outlining the terms and conditions of the home loan, including interest rates and repayment periods.

Step 5: Pay Transfer Fees And Costs

We have now arrived at the step where payments are required. These may include home loan cancellation fees, transfer duty (a tax payable to SARS), home loan registration fees, and conveyancer fees. If you’re wondering how these are calculated, we can tell you that transfer duties are based on the property’s purchase price, while home loan registration fees are determined by the value of the home loan.

Step 6: Transfer of Property Ownership

This is more or less the final step. Once all the documents have been signed, and payments have been made, all that is usually required is the transfer of ownership at the Deeds Office. This process usually takes about two to three weeks and after the transfer is complete, Title Deed is complete, and the home loan transfer process will be finalised.

Feeling Informed?

We understand that transferring a home loan can be a complex and sometimes expensive process, however, understanding each step can help you prepare and avoid unexpected surprises.

Our parting advice is for you to choose experienced conveyancers you can trust, to keep communication open with your lender, and start budgeting for all the fees coming your way.

Don’t forget that AA Inform offers a variety of property tools and resources, including our home affordability calculator and free property valuation reports. Tools like these can help you to assess your home’s worth accurately and get true insights into properties of interest to you.

Click here if you would like to take a closer look at these tools.