There are ways in tough times to hold on to your status as a homeowner, say the experts. Picture by Mohd Azrin/UnSplash
Durban - The recessionary environment - with the news that South Africans could face another large interest rate hike - is putting financial pressure on homeowners.
This is leaving many struggling to keep up with their home loan repayments and contemplating a forced sale.
Some are even facing the unfortunate reality of losing their homes and considering their options, including turning to their banks for assistance or selling.
For homeowners in this difficult position, banks and property experts offer the following tips to help you either keep your homes or at least retain your titles as homeowners by downscaling to a more affordable property.
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Communicate
Banks want to keep people in their homes and so encourage homeowners to contact them when they see they are approaching financial difficulty.
Absa, for instance, has proactive measures to identify and assist customers who show signs of financial distress, irrespective of whether the customer has missed a payment or not.
They offer a variety of assistance plans for customers who are in distress, with their ultimate aim being that the customers overcome the distressed situation and that they retain their homes.
FNB also says homeowners must contact their banks or home loan providers as soon as they realise they are unable to make payment on their bonds. In other words: don’t wait until the banks’ collections and recoveries team or department contacts you.
Enter into a new agreement
If, as a homeowners, you find you are unable to pay the full instalment on your home loan, you can contact your home loan provider and inquire as to what arrangements that could be made.
Because everyone’s situation is different it is important you contact your financial institution to discuss your situation.
Banks do have a variety of assistance options available to customers who are experiencing short-term financial distress.
These can include a limited period of lower repayment instalments.
If however you have long-term distress some banks have teams that can help you sell your home and more to a more affordable home. Banks normally look upon you making first contact favourably especially if homeowners confront the debt issue before it escalates.
Other ways you could be assisted include: the restructuring of payments; agreeing to interest only payments for a time; or reducing instalments over a specific period.
Consider selling before it is too late
If none of the bank’s options are suitable, if your accounts are up to date you could sell your property privately or with the assistance of an estate agent.
Banks also have assisted sales programmes.
Owners who are selling because of financial difficulty should “not leave it too late”, advises Lew Geffen Sotheby’s International Realty (LGSIR). If your property is sold by the bank on auction you may not get a good price and will still be liable for the shortfall. LGSIR says agents will not advertise that you are under pressure and will try to get the best possible price for you.
Debt-proof your home in 5 steps (see below)
Prevention is always better than cure and the best course of action is to not get into arrears in the first place.
There are several ways a homeowner can do this, both before buying and once the property has been transferred. Here are five ways:
1. Pay a larger deposit
Making a bigger down payment will mean buyers will need a smaller home loan and can negotiate for better rates as they’re negotiating from a stronger position.
2. Secure a lower interest rate
When applying for a home loan it’s generally a good idea to shop around to see what the different banks offer – negotiating a low interest rate (when possible) can do much to decrease costs on a month-by-month basis. An experienced bond originator can do this for you.
3. Pay a little extra each month
The more money you can pay into your home loan every month, the better. This can help reduce your loan term and help you pay off your home loan quicker. Even R500 extra a month can make a big difference. Homeowners can also consider making some extra money from their homes by renting out any extra space, agents say.
4. Refinance and consolidate debt
If you have owned your property for some time, you could have plenty of equity. It could be as simple as calling a mortgage broker and seeing if they can consolidate your debts, according to FNB.
5. Consider downsizing
Owners of multiple properties could also consider selling one to clear their arrears. If you don’t have this option you could consider selling you home, renting for a while and then re-entering the property market with a smaller property.
Looking to downsize? Find out what home loan you can get by clicking here here or find the ideal sized home for you here
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