If any homeowner finds they are unable to pay the full instalment on their home loan, they need to contact their home loan provider and inquire about arrangements that could be made.
“Each customer situation is unique, and so it is important for the customer to engage with their financial institution,” says Absa’s Geoff Lee. The bank has a variety of assistance options available to customers who are experiencing shortterm financial distress. This may include a limited period of lower home loan repayment instalments.
Lee says: “Should the distress be of a long-term nature, we have a dedicated team to assist the customer with selling their property and moving into a more affordable home.
“The sooner a customer advises us about their financial situation, the sooner we will be able to look at the different plans and options we have in place that could assist the customer for a period of time.” FNB will look upon such first contact positively, says the bank’s Buyisile Maseko, adding that it also has a number of options available, especially if home owners confront the debt issue before it escalates.
“The worse the crisis, the fewer options remain.” Some initiatives to assist struggling home loan customers are restructuring payments, agreeing to interest-only payments for a time, or reducing instalments over a specific period. It could also offer a three-month payment “holiday”, although Maseko says this option is not ideal as the unpaid interest will increase over this period. If none of these options are suitable, homeowners whose accounts are up-to-date could sell their properties privately or with the assistance of an estate agent, or via FNB’s assisted sales programme.
“It is, however, important to indicate that any private sale of a property requires the bank to first approve of the offer,” Maseko stresses. Absa’s assisted sales programme is HelpUSell, which helps customers sell their properties for the highest possible offer, Lee says.
“It allows the customer to work with the bank to sell the property. In the event there is a shortfall after the sale of the property, we are prepared to grant concessions or rebates to allow the customer to extricate themselves from the debt. “The HelpUSell programme is there to assist customers to avoid legal action and help the customers to sell their property at a market-related price.
“The bank further assists the distressed customer by upfronting the costs required to transfer (costs are debited against the home loan account) in order to expedite the transfer of the property.”
In situations where a home loan account starts accruing arrears, banks may be forced to take legal action. “The institution of legal action might result in a judgment being obtained against a customer and that customer’s property being sold via sale in execution,” Maseko says, noting that the bank cannot guarantee, influence or determine how much a property may be sold for at such a sale.
“In the event a property is sold for less than the customer owes the bank, that particular customer will still be liable for the shortfall and they will be released from their contractual obligations only upon the full settlement of the shortfall,” she says.
Can’t pay? Tips for your bond
In addition to contacting their bank or finance provider as soon as they realise they cannot pay their bond, FNB’s Buyisile Maseko offers this advice to help homeowners to keep their repayments down or save their homes.
Of course, it is best not to get into arrears in the first place.
Pay a larger deposit: Making a bigger down payment will mean buyers will need a smaller home loan and can negotiate for better rates.
Secure a lower interest rate: When applying for a loan, shop around to see what different banks offer. Negotiating a low interest rate will decrease costs on a month-by-month basis.
Pay a little extra: The more money you pay into your home loan each month, the better. This can help reduce your loan term and pay off your home loan quicker.
Refinance and consolidate debt: If you’ve owned your property for some time, you could have plenty of equity. Call a mortgage broker and see if they can consolidate your debt.
Sell or downsize: If you’ve got multiple properties, consider selling one to clear your arrears. You could rent for a while and re-enter the market with a smaller property.