Home Loan Trouble? You have options

Home loans, usually one of the biggest monthly expenses, are also becoming one of the biggest financial headaches for consumers battling to keep up with bond repayments.

The monthly repayment on most bonds is currently about 7% higher, in cash terms, than at the beginning of last year, said Gerhard Kotzé, MD of the RealNet estate agency group.

“The repayments on credit cards, cars and other debt are also higher, and consumers are also paying more for food, water, electricity, transport, school fees and all forms of insurance," he said.

About 9.85 million South Africans have impaired credit records, with the number of impaired accounts being over 20 million, revealed the latest statistics from the National Credit Regulator.

“So it’s no wonder really that an increasing number of people are concerned about being able to meet all their financial commitments – and about what would happen if they were to default on their bond repayments.

Don't panic

Kotzé advised worried homeowners not to panic.

“For a start, homeowners need to understand that the banks really don’t want to repossess their homes," he said.

"They would far rather have a homeowner in place and some regular income from the property than be forced to incur the costs of repossession, and of securing and maintaining the home, as well as the total loss of repayments on the loan for several months or even years.

“Secondly, homeowners need to take their banks into their confidence if they are having financial difficulty, to show that they are willing to make the necessary arrangements to keep their homes.

"And thirdly they should keep paying as much as they can, in order to keep the interest on the loan from compounding too rapidly,” said Kotzé.

'Bank on your bank'

The best thing a homeowner can do when they run into bond affordability problems, is to immediately contact their bank, recommended Bruce Swain, CEO of Leapfrog Property Group.

"They do not want to see someone lose their property and repossession would always be a last resort," he told Fin24.

"If they (the bond holders) have a good track record, the bank will be more than willing to work out a payment plan that will assist the owners to keep their homes."

Swain said should the situation be really desperate, the bank will assist the homeowner(s) to sell their home through approved service providers, where the sales commission is substantially reduced.

Meanwhile, according to John Loos, household and property sector strategist at FNB, the level of homes being resold at values below their previous purchase price has risen mildly in recent months, but still remains “moderate” by historic standards.

Although not yet at “high levels”, he said a rising trend in the incidence of resale price deflation is important for mortgage lenders and home owners alike. Loos explained this is because it reflects a market in which it has recently become mildly more difficult to “trade out” of properties without making a loss.

This can in some cases be troublesome when there is outstanding mortgage debt to be settled, especially when the seller is experiencing financial stress, Loos said.

Article courtesy of Fin24