It’s every homeowner’s worst nightmare – realising that no matter how much you scrape and save, you just don’t have enough money to cover your bond repayments. With the cost of living escalating every day, it’s a situation that has become all too common in South Africa. Thankfully, experts say it doesn’t have to be the beginning of the end for your home.
Leonard Kondowe, National Admin Hub Manager for Rawson Property Finance, shares his advice on what to do if you find yourself in this scary situation.
Step 1: Get in touch with your home loan financer/bank
“It can be very tempting for bondholders to just ignore the problem and hope their bank doesn’t notice a missed payment or two,” says Kondowe. “This is really the worst thing you can do, delaying the inevitable and putting your lender in a far less sympathetic position when they eventually contact you. It’s far wiser to approach your bank as soon as you realise you’re in financial difficulty, and leverage their experience to find a workable solution to tide you over what is hopefully a temporary financial crisis.”
Some banks are able to handle enquiries about mortgage repayments via their call centre, but most will require you to visit your local branch and sit down with an expert. It’s often easiest to start with a phone call and let the call centre direct you to the appropriate person or place.
Step 2: Be open and honest about your situation
Once you’ve found the right person to talk to, Kondowe says it’s essential to be as open as possible and bring proof of the issues that are causing your current financial crisis. That includes documentation of your current income and any job losses, unexpected expenses or overwhelming debt.
“The most important thing is to be honest – don’t try to manufacture a fake story for sympathy,” says Kondowe. “Your lender is going to require proof of any claims you make, and any lies or embellishments are only going to work against you.”
Step 3: Work with your lender to find a solution
While it’s easy to think of your bank as the enemy, Kondowe says that really isn’t the case for distressed bondholders.
“Banks aren’t in the business of repossessing homes – it’s far more beneficial for them to help you over your rough patch, retain a loyal client and avoid the moral and legal dilemmas of trying to evict a person from their home,” he says. “As such, they really do go the extra mile to help homeowners find sustainable solutions to their financial problems.”
According to Kondowe, those solutions will vary based on your specific circumstances, but could include a temporary or permanent reduction in your monthly repayments, a brief repayment ‘holiday’, a debt consolidation proposal, or any one of a variety of other options.
In a worst-case scenario, your bank could even assist you in selling your property for the best possible price by offering prospective buyers preferential home loan rates.
Step 4: Understand any long-term effects on your bond
No matter what solution you and your bank settle on, Kondowe says it’s important to understand the long-term effects it will have on your bond.
“Any reduction in repayments, unless followed by a proportional increase, will result in an extension of your overall bond term,” he says. “This means you’ll be paying more interest in the long-run, but that amount will vary depending on how much longer your term is. Make sure you understand this before signing on the dotted line and ask about alternatives if you’re not comfortable with the numbers.”
Step 5: Stick to your new agreement
Once your bank has gone to the trouble of helping you find a solution to your financial crisis, it’s important to do your part to stick to the agreement you made. If not, you could find yourself in even more of a pickle – and your bank is far less likely to be sympathetic the second time around!
“Remember, you’ll be signing a legal agreement with your bank and that can have serious consequences if you don’t uphold your end of the bargain,” says Kondowe. “If you have any doubts about your ability to follow through on the agreement, rather raise those questions before signing and explore any alternatives that may be available to you.”