By Angelique Ruzicka, editor, Justmoney
Anyone can run into financial difficulties from time to time. But if things get really tough and you can’t make ends meet, let alone pay for the roof over your head, there is always a way out. Here we offer several options you can consider if you are struggling to repay your bond instalments. You’d be happy to note that they don’t always involve you selling your home:
Enter into a payment plan with your bank
If you fall behind with your bond repayments, or anticipate that you will be doing so soon, it’s best to be honest about this and talk to your bank about it. It may be the last thing you want to do as you may feel embarrassed but this may all work out.
If you feel embarrassed, remember you’re not alone. Well known financial journalist Maya Fisher-French recently highlighted in her book ‘Maya on Money’ how when she fell on hard times that she opened up to her lenders about her problems.
She found that the people working for those companies were very understanding. “What amazed me was how understanding people were. Without exception, all of them agreed to a payment plan. They were more than willing to give me some leeway as long as I could pay something each month, saving them the far more expensive and time-consuming route of debt collection,” she wrote.
Nedbank, for example, explains on its website what you can do if you run into financial difficulty. For example, if you have missed a couple of payments, it highlights that you can either talk to them about paying back those missed instalments all at once or over time or another alternative is to have the bank restructure your loan over a longer term. This tactic will help to reduce your monthly instalments too.
Standard Bank adds: "It is important to communicate with the Bank as soon as one finds themselves under financial pressure, the Bank provides opportunities to remedy the situation, some of which include, our Customer Assist Program."
“Always contact your bank first. They have a lot of programmes that can help people in financial distress. Don’t stick your head in the sand and leave it until it’s too late and it becomes a sheriff’s auction. This is not what you want,” points out Grant Gavin, broker owner of Durban based Re/max Panache.
Renting it out
Renting out your property while you rent a smaller property could also work in your favour. While you will have someone else live in your home for a while it will effectively be them that pays off your bond while you get back on your feet.
But make sure there is nothing to prevent you from doing so. Some banks forbid you to do so in their bond contracts for longer than twelve months. If you need to rent your property out for longer you will have to renegotiate your bond contract with the bank.
Gavin warns that you need to ensure that the rent will cover your bond before you go for this option. “Renting out is a possibility but sometimes you may find you are renting it out for less than the bond. Make sure that by renting out the property it’s not leaving you in the same position you were in before.”
Contact an estate agent to find out how much you could rent your property out for. If it is for less than the bond see if this option saves you money if you have to make up for any shortfall. If it still leaves you in the red then you will have to consider another alternative.
Debt counselling
Debt counselling is a popular option for those in financial difficulty. However, it’s not for everyone. “Debt counselling is particularly suited to those who have problems repaying multiple loans,” points out Ian Wason, CEO of DebtBusers. “If it’s just your home loan that you are struggling with then it’s best to contact your bank directly to discuss repayment options.”
Debt counselling isn’t a cheap exercise as you will have to pay debt counselling and legal fees. However, this option can provide you some protection and the added benefit of you keeping your home provided you and your debt counsellor are able to agree to a reasonable payment plan with all your creditors and that you don’t default (skip) on any repayments.
Selling
If you’ve exhausted all the other options, then selling your home may be the next best bet. Again you are not alone here if you are considering this. According to the latest statistics from FNB 12% of sellers have recently downgraded to smaller, more manageable homes due to financial pressure. Thankfully, this figure is not as high as it was back in 2009, where around a quarter of sellers were downscaling due to financial pressure.
However, if you know you are struggling financially don’t delay selling your home if this is the only option left to you. Selling your home could take time and if your property stays on the market for a while it could push you even further in the red.
According to FNB’s stats, the average time it takes to sell a home could be anything from 9.6 – 17 weeks depending on the type of home you have. “Sell your home while you still have time and are in a position to do so,” advises Gavin.
Hiring estate agents, conveyancers etc., can also cost a lot of money so you have to factor in these costs too. However, you don’t have to go the estate agent route as banks have ‘quick sell’ programmes that you can take advantage of. The bank markets your property on your behalf through its approved list of agents.
"In the event of making the decision to sell your home, our Easy Sell programme [is] designed to help you sell your property through our panel of estate agents," says Standard Bank.
If you leave it too late you may have to go through a foreclosure process, but this has many downsides. "The final option being foreclosure is a forced sale of a home through an auction, and the inability to recoup all money owing, means that the homeowner is still liable for the shortfall, all additional amounts owing and interest. Foreclosure remains the Banks last resort and our intention is always to prevent a customer from losing their home," explains Standard Bank.
Ultimately, if you are in a good financial position now it may benefit you to pay more into your bond as you never know when that cushion may come in handy.
"It is important that one develops a plan catering for both foreseen and unforeseen events, where possible pay additional funds which may provide relief in tough times," says Standard Bank.
To find out what programmes your bank offers, contact your bank directly.
Who to contact if you get into financial difficulty
Debt Counsellors Association of South Africa (DCASA): 0861 432272|
Absa Home Loans: 0860 111 007
FNB Home Loans: 087 730 1144
Nedbank Home Loans: 0860 553 573. Watch Nedbank’s home loan repayment problem video here.
Standard Bank Home Loans: 0860 123 0000