Struggling to make your home loan payments?

It is something you wouldn't wish upon anyone but life (and a global pandemic) happens and sometimes financial stress may make it difficult to keep up your monthly bond repayments on a property. 

"It's a terrible reality but if you cannot work out a financial plan to honour your bond payments, it's best to act swiftly," says Johan van Schalkwyk, Principal at Leapfrog Roodepoort. The first step is to approach your bank as soon as you feel you cannot repay the bond, as well as consulting a trusted property advisor to ensure the timeous sale of the property to minimise losses.

"The best course of action is typically to put the property on the market as soon as possible to recover the costs and settle with the bank before they take the necessary legal steps involved in foreclosing on a property," Van Schalkwyk explains. 

Banks usually consider a property to be "distressed" when the homeowner can no longer afford the bond repayment and has consistently missed the monthly payments.

Contact a trusted property advisor when (or before) you default on a payment as they have experience in selling distressed properties and can advise you on the best way to make sure your home gets sold at the best possible price, in the shortest possible time. If you have built up enough equity, this option means that you may have enough money to pay off your outstanding bond, as well as other debt.

The foreclosure process by the bank can start as early as when the bond holder is two months or more in arrears. "In the banks' experience once somebody is more than two months in arrears they are unlikely to catch up again and so they usually begin the legal process," says Van Schalkwyk.

The ideal is thus to beat the banks to it by voluntarily selling your property, before being forced to do so. It's an undesirable situation for anybody but it's important to be realistic and proactive about it, and to seek the necessary help and advice to settle it as favourably as possible.

If you alert the bank, or a trusted property advisor, in time, they can help by selling the property at as close to its true market value as possible and draw on their network of attorneys to negotiate a real and amicable solution to the situation.

"The fact is the bank does not want your property and are ready to find a workable solution for recovering the loan, even if this means over an extended period of time. This means that banks may be prepared to re-finance the remaining debt, after sale of your property, over an extended period of time, without blacklisting you," Van Schalkwyk explains. 

This is by far a more favourable outcome, when you consider that in order for the banks to foreclose on a property and take it to auction they are required to follow the legal process, which involves taking judgement against the owner. This automatically results in the borrower (mortgagee) being blacklisted, Van Schalkwyk shares. 

The best of a bad deal 

Being forced to sell your property is not a situation that anybody anticipates but life happens and acting speedily when it does happen can save you a lot of stress, money... and your credit record.