Home loan repayments can cause a lot of anxiety.
A home is the largest, most important asset owned by most families. However, home loan payments sometimes become difficult to maintain.
Steven Barker, head of home loans at Standard Bank said, “The fact that you can’t pay all that is due [on a home loan] is generally a sign of things to come. Ignoring the problem for 30 days just means that next month you owe two full installments, miss a payment for the second month in a row and the situation gets worse and the interest payment costs more.”
The consequences of sitting back and waiting for the bank to approach the individual who has not paid his/her loan could be devastating.
“Within 60 to 90 days of payment on a home loan falling into serious arrears, the legal process of repossessing a home begins. If the home is sold at an auction and does not achieve the amount owing on the bond, the homeowner is liable for the shortfall,” explained Barker.
He added that legal action could be instituted by a bank for them to get back the amount owing to them with legal costs added onto that amount.
Sandton-based economics and accounting lecturer, Carmen Carvalho said, “When home loan repayments become difficult to meet due to unfavourable financial circumstances, help in meeting these commitments should be sought as soon as possible by the homeowners.”
She added that most banks were willing to assist by helping to sell the house to defray costs, arranging a partial repayment of the amount owing or rescheduling the payment term to help reduce the monthly payments. “These measures will assist a homeowner in maintaining a good credit rating and not lose their home,” said Carvalho.
Barker added, “If the worst scenario occurs and a bank finds that a person simply will not be able to meet their financial obligations, steps are taken to help the homeowner sell the house.” He stressed that if there was still money outstanding on a home loan, the homeowner could then sign an acknowledgement of debt and arrange to pay off the balance. “In some cases if the amount owing is considerable, we reduce the amount owing by up to 10 percent.”
