>> Homeowners need to be honest with themselves
>> Make use of a professional debt counsellor
Although the property market has seen an increase in activity over the last few years, economic conditions are still tough for many and the predicted interest rate hikes are likely to place further strain on homeowners around the country.
“This year, those with high debt levels will be heavily affected as the interest rate increases and the cost of living continues its upward trajectory. While for some, it may simply be a matter of readjusting certain behaviour to rectify their financial situation, others may find themselves in more dire circumstances further along the road,” Regional Director and Chief Executive Officer of
RE/MAX of Southern Africa said in a recent press release.
Evaluate your situation
Homeowners need to be honest with themselves and look at their circumstance objectively when determining whether they can continue to pay their bond. Goslett said that if a homeowner can no longer afford the bond, he needs to notify the lender as soon as possible. “Avoiding the situation and doing nothing is the worst possible decision a homeowner in distress can make. It is best to be upfront with the bank and tell them the situation, rather than defaulting on a payment without notification. If the situation is left to run its course, it will not only result in the homeowner losing their property, it will also lead to a tarnished credit record and black listing,” Goslett said.
Communication is key
Some homeowners might be under the impression that the bank will repossess their property as soon as they communicate their distress. However, this is not the case. Banks want the homeowner to keep his property and will try to assist where possible to ensure that this happens, but the only way they can help is if they are aware of the situation. “There are a number of ways that the bank can help the homeowner, such as rescheduling debt, offering some advice on the right steps to take or renegotiating the term of the loan from 20 years to 30 years. Once the homeowner tells his lender where he is financially, the bank will be able to offer solutions.”
Seek professional council
If the situation has gotten to the point where the homeowner can no longer handle it by himself, it is advisable that he makes use of a professional debt counsellor who can provide guidance. A debt counsellor will be able to assist the homeowner in reviewing his finances and submitting a proposed repayment plan to the relevant creditors. An application will be made in court to have the proposal granted. Once the proposal has been granted creditors will not be able to proceed with legal action and the bank will not be able to repossess the property. If it seems as though the homeowner’s circumstances are not likely to change in the near future, he can opt to be placed under administration rather than debt review – however in this case the property can be repossessed to order to mitigate the debt.
Sell the distressed property
According to Goslett, homeowners that do not see any way out of their financial situation can opt to consult with a real estate company that specialises in the sale of distressed properties.
In an effort to help distressed homeowners, banks are working with reputable estate agencies to sell their properties at market-related prices. If the homeowner would like to keep his credit record intact, the most effective method of doing so is selling the property and recovering from the financial crisis.
“In certain cases where the homeowner has built up enough equity, he may be able to cover not only the remaining bond, but also some other debts as well. Essentially this option could provide the homeowner with an opportunity to start again with a clean slate,” Goslett said.
