In this article, we share our best tips and steps to take if you’re struggling to pay your Home Loans. You’re not alone and this isn’t the end of the road.
We all know home loans, bonds, or mortgages as loans given to you by a credit provider, financial provider, or normally by banks. This form of credit is normally granted where the home or property you are purchasing is used as a form of security in case you cannot make the loan repayments.
The are various factors that have left many South Africans desperate for help and unable to pay their home loans. While for some, it may simply be a matter of readjusting certain behaviors to rectify their financial situation, others may find themselves in more dire circumstances.
We advise that you avoid feeling so shameful about the current financial distress predicament that you avoid asking for help. South African homeowners in financial trouble need to take immediate action and proceed with the necessary steps before the situation slips out of their control.
Steps to take if you’re struggling to pay your Home Loan
This is by far the best option you can take to protect your most valuable asset. If your financial situation has reached the point where you can no longer handle the debt repayments by yourself, make use of a professional debt counsellor who can provide guidance.
They can help you in reviewing your finances and submitting a revised repayment plan to the relevant creditor/s. An application will be made in court to have the proposal granted. Once the proposal is granted, creditors will not be able to proceed with legal action and the bank will not be able to repossess the property. (Learn more about Debt Counselling Here)
Understand and evaluate your situation/ options
Be honest with yourself and look at your circumstance objectively to determine whether you can continue to pay your bond. If you can no longer afford it, notify your lender as soon as possible. Avoiding the situation and doing nothing is the worst possible decision you can make.
It is best to be upfront with the bank and tell them the situation, rather than defaulting on a payment without notification. If the situation is left to run its course, it will not only result in you losing your property; it will also lead to a tarnished credit record and blacklisting. A blacklisting will leave you unable to obtain any credit for the next five to 10 years, which means that even renting a property will become difficult because most landlords do credit checks on their potential tenants.
Renegotiate the terms of the contract with the creditor
Counter to what many may believe, the bank will not repossess your property as soon as you communicate your distress. Banks want the homeowner to keep their property and will try to assist where possible, but the only way they can help is if they are aware of the situation. There are a few ways that the bank can help, such as rescheduling debt, offering some advice on the right steps to take, or renegotiating the term of the loan from 20 years to 30 years. Once you let the lender know about your financial situation, the bank will be able to offer solutions.
Make sure that the repayment arrangement is:
- Affordable. If it isn’t affordable, don’t agree: insist on a repayment amount that you can afford.
- For an appropriate term. Don’t agree to a short-term arrangement if you know you need several months.
- Complete and covers what happens at the end of the term. If you know you won’t be able to afford higher than normal repayments when you get through your temporary difficulties, specifically ask for any arrears to be added to the loan and for the term of the loan to be extended.
The last resort could be to sell the distressed property
If you do not see a way out of your financial situation, then it will be best to consult with a real estate company that specializes in the sale of distressed properties. Ensure that the agents are Certified Distressed Property Advisors (CDPA).
KNOW YOUR RIGHTS ABOUT HOUSE REPOSSESSION
Before a home can be repossessed the following process will usually take place:
- The bank contacts the debtor by phone or in writing once there is a default in the repayment of the monthly home loan amount.
- The bank discusses the situation with the debtor and gives them a number of options including catching up with the arrears, undergoing debt counselling, or trying to sell the property.
- Should the bank come to the conclusion that none of the proposed options will resolve the issue, the bank forecloses.
- Some banks in South Africa offer clients assistance to sell their homes on the open market before they foreclose.
- The bank will ask its legal department to acquire a legal summons from the High Court or a Magistrate (depending on the amount of the home loan orproperty).
- The summons is delivered to the creditor in person by a court-appointed sheriff.
- The bank then needs to formally apply for the right to auction off the property. This is done in court where a judge determines whether legal and fair processes have been followed.
- Once the property is sold, the money received will be used towards covering the outstanding loan amount and costs. Whatever remains will be paid to you.
- Contact your bank before they contact you if you have missed payments.
- Once a section 129 notice (letter of demand) is issued, you literally have 10 days to apply for debt review, avoid delays
- You can only be evicted from a house sold on auction when the property has been transferred to a new owner. If you are evicted before a transfer has taken place it is illegal.
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