Financial tips to keep your house despite Covid-19 economic effects

WITH the Covid-19 pandemic, people are feeling the pinch in their pockets, and some people might even be afraid the economic downturn could cost them their homes.

Are you in danger of losing your home because of lockdown layoffs?   

Your flat or house is probably your most important asset and a great source of emotional comfort ‒ but given the pandemic layoffs and precarious economy, you may be concerned that you could lose your hard-earned property.  What are the chances of your home being repossessed, and what are your rights in fighting back?   

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“The current economic climate is really worrying for many people whose household finances have already been under pressure pre-Covid-19,” said JustMoney‘s commercial manager Sarah Nicholson.

The law

South African law allows that, if you default for three months or more on your monthly home loan payments, the lender may cancel the agreement, repossess your house, and sell it in order to recover the outstanding money you owe them.  

Previously, court rules allowed repossessed homes to be sold without a reserve price. This resulted in heart-breaking stories of banks repossessing homes when an owner was three months in default, and the property being sold at a sheriff’s auction for less than the amount outstanding, leaving the former home owner without their home, and still in debt.

Fortunately, more stringent rules have since been put into place.  If you are concerned that you could find yourself in a precarious situation, there are several options to explore immediately.  

“There are actions to consider if you cannot afford your home,”  said Nicholson. “You can consider renting out your property, restructuring your loan over a longer term, or, if you have problems repaying multiple loans, you could consider debt counselling.”   

Don’t hide

“Rather than changing your cellphone number and hiding from your creditors, it’s far better to approach the bank and have an honest conversation about the situation you find yourself in,”   said Nicholson.

There are options available to you, especially if you have always paid the monthly loan amount and have a good credit record.   These might include making repayment arrangements with your bank, or even submitting to debt counselling.

Downsizing

Another option, if you have elsewhere to live, is to rent your house out while you live somewhere less expensive.

If all else fails, it is better to sell your home before it is repossessed rather than risk the damage to your credit profile by being evicted. 

This way, you are likely to get a better price and avoid going through the stress of a legal process and associated costs, and you are in control of the situation rather than being at the mercy of circumstances.

Banks

Some banks have developed their own systems and tools to help customers to sell their properties and could support you in the process.  It is far better than defaulting on your home loan without communicating.

The best bet is to contact your bank.  “Depending on the situation,  they should initially offer you options such as spreading the bond over a longer period, or receiving debt counselling,” said Judy Bryant. 

“Should you receive a section 129 notice, this is the final step before the legal process begins. It will inform you that you are in arrears for a certain amount at a given date. This notice is issued in terms of section 129 of the National Credit Act,” advised Bryant, a senior consultant for JustMoney.

“See this as a last chance to take action and prevent your creditors taking legal action,” advised Nicholson. 

“Do avoid delays at this stage, as you have only 10 days to apply for debt review. This is the process whereby a debt counsellor assesses your outstanding debt and implements a restructured debt repayment plan.”

Sheriff

Bryant explained that if the debt review process fails, the bank can ask its legal team to get a summons from the High Court or Magistrate’s Court.

“This is delivered by a sheriff,” she said.  “The bank then has to formally apply to court for the right to auction off your property.   A judge must check that legal and fair processes have been followed, taking into consideration whether this is the primary residence of the debtor, as well as alternative ways of settling the judgment debt.”

Valuation

Bryant added that financial institutions are obliged to show proof of the property’s market value, the amount owing on the bond and rates and taxes.  “It is worthwhile checking that this information is all correct,” said Bryant.  

If the sale has to go ahead, the money goes towards covering the outstanding amount on the loan and costs. Whatever remains will be paid to you.  However, Bryan stresses that a homeowner can only be evicted from a house sold on auction when the property has been transferred to a new owner. You cannot be evicted before a transfer has taken place.  

Elephant in the room

“It’s essential to address the ‘elephant in the room’ as soon as possible and get information and help. Check where your money goes, hold a family meeting to talk about finances, and inform yourself as much as possible about your options,” advised Nicholson  adding that JustMoney also have many articles on its website to help advise consumers.

Caxton Local Media Covid-19 reporting