Despite our best efforts, we all hit bumps in the road at times and financial ups and downs can’t always be predicted. So what happens when, as a homeowner, you find yourself under unexpected financial strain and your monthly bond repayments suddenly become more than you can handle?
“This kind of situation happens all the time,” says Mike van Alphen, National Manager for Rawson Finance, the Rawson Property Group’s in-house bond originator. “As hard as banks try to ensure that bond holders will be able to meet their repayments, people get retrenched, they have unexpected medical expenses, the interest rates rise – there are all kinds of things that can affect financial circumstances that nobody can predict. Luckily,” he continues, “because it’s so common, there are procedures in place specifically designed to help bond holders out when they do find themselves in financial trouble.”
As in any recovery process, the first step, according to van Alphen, is to admit that you have a problem – and to do it as early on as possible. “Don’t wait until you’ve underpaid or missed your first repayment,” he advises. “Keep an eye on your finances, and as soon as things look like they might get rocky, start making plans to minimise the damage. These things don’t go away on their own, so you can’t just hide your head in the sand and hope for the best.”
In many cases, re-prioritising your budget to minimise non-essential expenses and channel funds to your bond may be enough to tide you over a rough patch. If that’s not the case, the next step is to get in touch with your bank as soon as possible.
“A lot of people might be tempted to hide their distress from their mortgager, but that’s actually the worst possible thing you can do,” says van Alphen. “It’s in your bank’s best interests to help you keep your home – nobody wins in a repossession situation – but they can’t help you unless you let them, and the earlier you tell them, the more help they can give.”
The first thing your bank will do is assess your income and expenditure, and advise you on anything you may have overlooked when prioritising your budget. Assuming there’s no wiggle room, however, they’ll move on to other measures.
“The exact process differs from bank to bank, and customer to customer,” says van Alphen. “You might be allowed to pay a little less for a few months while you get back on your feet, or you may be offered a brief “payment holiday” to give you time to get your cash flow back to normal. In situations where your finances are likely to be compromised over a longer term, your bank might restructure your loan over an extended period to reduce your monthly repayments, permanently. There are lots of options available when you talk to the right people.”
Of course, there are situations in which no amount of restructuring is going to make enough of a difference, in which case your best option is going to be selling your home to pay off your outstanding debt. While you can choose to do this privately, it usually makes more sense to take advantage of your bank’s help once again, opting into a process known as a bank-assisted or bank-mandated sale.
“A bank-mandated sale is where the bank takes responsibility for hiring an estate agent and facilitating the sale of a property,” explains van Alphen. “The owner still has the right to accept or refuse any offers, but they also have the benefit of fairly significant buyer-incentives provided by the bank. These incentives include 100% bonds and significantly discounted legal fees, which can make the property quite a bit easier to sell.”
The moral of the story, according to van Alphen, is that no matter how dire your financial situation may seem, your bank is there with a plan to help – if only you’ll let them. “Banks have entire divisions specifically trained to help rehabilitate distressed creditors,” he says. “You won’t find anyone more qualified, or more motivated, to see you back on solid financial ground.”
To get more advice on managing your bond repayments during a financial crisis, contact your mortgage bank on the number listed below.
ABSA: 086 0111 007
FNB: 087 730 11 00
Nedbank: 086 055 3573
Standard Bank: 086 129 2273
