What to do if you can't pay your bond
If you are battling to make your home loan repayments, notify your bank. This is the message from all the banks.
Often consumers bury their heads in the sand, hoping that their fortunes will turn. But this failure to confront the problem can lead to you losing your home and being saddled with enormous debt for years to come.
'Maintain contact with your bank and keep us informed of changes in your financial position. The bank will only take legal action as a last resort. It is always our intention to keep you in your property,' Calvin Ndlovu, head of collections at First National Bank (FNB), says.
Carel Gronum, head of home loans at Absa, says the banks are generally most flexible and able to assist when you have not yet missed a payment and when you are actively communicating with them about honouring your loan commitments.
'A constructive approach to negotiating with your bank is important,' he says.
Gronum says the appropriate remedy may depend on the reason for your default or your financial difficulty.
'If it is a short-term problem, such as medical problems or going on maternity leave, then it may be possible for us to structure your repayments around that period in order to accommodate you.
'If it is a longer-term problem such as job loss, and you don't have Debt counselling is a regulated process whereby a debt counsellor negotiates, on your behalf, with all your creditors, to have the term of each credit agreement extended and the instalments reduced. A debt counsellor can also negotiate for a reduction in your interest rates. But you are only eligible for debt counselling if a debt counsellor finds that you are over-indebted.
If your bank has already instituted legal action against you for the recovery of your home loan debt, your home loan can be excluded from debt counselling, in terms of the National Credit Act (NCA). a new job on the horizon, we may be able to offer alternative solutions that can assist to make the payments more affordable.
'Alternative repayment solutions might include a fixed-rate mortgage contract for a certain period, which will give peace of mind when interest rates are rising, or an extension of the term of an existing mortgage loan, taking into account certain conditions,' Gronum says.
Absa may also offer you help in selling your property if you have no alternative but to sell. Absa calls this service HelpUSell. It is an alternative to foreclosure, which results in a sale in execution - also known as a sheriff 's sale or sheriff 's auction.
Properties sold on a sheriff 's sale or public auction sell for about 30 percent less than properties sold on the open market, Gronum says. For this reason, it is in your interests to rather sell your property yourself - or with the help of your bank.
All the banks offer a similar service to Absa's HelpUSell and their objective is the same: for you to sell your property as quickly as possible so that you can pay the bank as much of your loan balance as possible.
To make your property more attractive to potential buyers, your bank may even give a qualified buyer a 100 percent bond and a big discount on their bond registration costs. Ndlovu says FNB is prepared to consider a number of remedies for customers who are battling to pay their home loans. These include:
Full settlement of the arrears - FNB suggests freeing cash to settle your arrear payments by selling assets or cashing in policies to raise additional funds.
QuickFix - a special arrangement which may include interestonly payments for a specified length of time, a three-month payment holiday, or reduced instalments over for a specified length of time. A full financial assessment is done and each case is handled according to its merits.
Remember that during a 'payment holiday', interest on the bond will continue to mount, so you end up paying more in the long term, as with the other fixes. Debt review. The option to sell your property or use FNB's Quicksell programme.
Ndlovu says the Quicksell programme is a private sale option for customers who volunteer to sell their property quickly.
'A minimum reserve price is agreed upfront and the process is transparent and easy to understand, which minimises the prospect of a prolonged deal,' he says.
If you opt to go the Quicksell route, you can get a discount of up to 25 percent of the current outstanding loan balance, which is applied if there is a shortfall after the sale of the property, Ndlovu says. The customer is then given the option to repay the shortfall interest-free over 10 years. Discounts are not guaranteed, but are negotiated on an individual basis.
For example, if you owe R1 million and your property sells for R800 000, the shortfall will be R200 000. Should a discount of 15 percent be granted, the discount will be 15 percent of R1 million, R150 000. Thus the shortfall the customer will be liable for is R200 000 less R150 000 discount, which equals R50 000.
Nedbank offers an 'Assisted Sales' service. Any shortfall owing to the bank after you have sold your property can be paid off over five or 10 years interest-free, depending on what you can afford. once all their short-term debts have been settled and they are still paying off their home loans.
Calvin Ndlovu, the head of collections at First National Bank (FNB), says it is imperative that payments under an accepted proposal or consent order be maintained on all debts. 'In the event of default while under debt counselling, the bank has the right to terminate debt counselling and proceed with legal action. Despite this, clients are encouraged to maintain contact with FNB in an effort to conclude an arrangement and prevent a forced sale of the property.'