WHAT HAPPENS IF YOU WANT TO PAY OFF YOUR LOAN AHEAD OF SCHEDULE?

If you want to pay off your home loan before the end of the loan term (usually 20 or 30 years), you must give the bank at least 90 days’ notice that you plan to do so and will be terminating it. The National Credit Act allows the bank to charge an early termination fee if you fail to give 90 days’ notice.

The penalty charge for early termination is equal to 90 days’ interest on the balance outstanding on the home loan. For example, an early termination fee on a home loan with a balance of R500 000 and an annual interest rate of 10,5% can be as follows: (R500 000 x 10,5%) divided by (365 days divided by 90 days) = R12 946.

However, it will depend on your bank. Some banks don’t charge this fee.