People in financial difficulties in these tough times can get to keep their homes provided they approach their bond lenders for help immediately
The recessionary environment, which has been aggravated by the Covid-19 pandemic, is putting financial pressure on homeowners, 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 them either keep their homes or at least retain their titles as homeowners by downscaling to a more affordable property.
Banks want to keep people in their homes and so encourage homeowners to contact them when they see they are approaching financial difficulty. Absa 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, says Geoff Lee, managing executive for home loans, retail and business banking. “We offer a variety of assistance plans for customers who are in distress, with our ultimate aim being that the customers overcome the distressed situation and that they retain their homes.” Echoing this, Buyisile Maseko, growth head at FNB Home Finance, says homeowners must contact their banks or home loan providers as soon as they realise they are unable to make payment on their bonds. “Don’t wait until the banks’ collections and recoveries team or department contacts you,” she says.
Enter into a new agreement
If homeowners find they are unable to pay the full instalment on their home loan, Lee says they need to contact their home loan provider and inquire as to arrangements that could be made. “Each customer’s situation is unique and it is therefore important for the customer to engage with their financial institution.” He explains the bank has 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. “Should the distress be of a long-term nature, we have a dedicated team to assist the customers in selling their property and moving into a more affordable home.” FNB will look upon such first contact positively, says Maseko, adding that it too has a number of options available, especially if homeowners confront the debt issue before it escalates. Some initiatives to assist struggling home loan customers are restructuring payments, agreeing to interestonly 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, homeowners whose accounts are up to date could sell their properties privately or with the assistance of an estate agent. Banks also have assisted sales programmes. Owners who are selling due to financial difficulty should “not leave it too late”, says Lew Geffen Sotheby’s International Realty’s Jill Lloyd. If their property is sold by the bank on auction they might not get a good price and will still be liable for the shortfall. “It is important not to get to that stage. Speak to an experienced agent and they will market your house and, if necessary, keep in touch with the bank to keep them from pressurising you… Agents are not going to advertise that you are under pressure. They are going to try to get the best possible price for you.”
Debt-proof your home
Prevention is always better than cure, Maseko says, 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: 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. 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. 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.
Refinance and consolidate debt
If they have owned their properties for some time, homeowners could have plenty of equity. It could be as simple as calling a mortgage broker and seeing if they can consolidate your debts, Maseko says.
Maseko also advises owners of multiple properties to consider selling one to clear their arrears. If they don’t have this option then they could consider selling their home, renting for a while and then re-entering the property market with a smaller property.