Act before falling behind on home loan repayments

The steep rise in interest rates will have impacted many households’ budgets. For some, this might simply require some readjusting of certain behaviours to rectify their financial situation. For others, it might be time to reach out for help before the situation becomes too severe.

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, advises homeowners to take a realistic look at their finances to make sure they can afford to keep up with the repayments on their home loan and other debts. “It is vital that homeowners in financial trouble take action before the situation slips out of their control. It is a time to act decisively, take control of the situation, and consult with people who can assist,” he advises.

Goslett adds that the sooner a homeowner acts, the better their chances are to rectify their financial situation and to have an opportunity to start afresh. “It is best to be upfront with the bank rather than defaulting on a payment without notification. If the situation is left to run its course and the homeowner is not communicating with the bank, not only could it result in the homeowner losing their property but it could potentially also lead to a tarnished credit record and blacklisting. Even renting a property could then become difficult because most landlords do credit checks on their potential tenants,” Goslett cautions.

He also addresses a common misconception that the bank will repossess a property as soon as a homeowner communicates their distress. “Banks do not really benefit if their client’s home is repossessed. It is much more beneficial for the bank if the homeowner continues paying off their debt over time. That’s why they will try to assist where possible,” says Goslett.

According to Goslett, there are a few ways in which a bank might offer assistance, including:

• Rescheduling/restructuring debt
• repayment arrangement options
• renegotiating the term of the loan from 20 years to 30 years
• Offering to list the home on the bank’s distressed property program

“Once the homeowner tells their bank about their financial situation, the bank will be able to offer solutions that are best suited to the client’s needs. Often, the most effective method to keep the homeowner’s credit record intact is to sell the property through the bank’s distressed sales program.”

“This does not mean that the home will be sold at auction or that it can be sold without the owner’s consent. The bank works with agents to set a fair price that the seller has to agree to before the deal can go through. In certain cases where the homeowner has built up enough equity, they may then be able to cover not only their 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 explains.

As one of the approved real estate agencies for SA’s four major banks’ distress sales departments, RE/MAX of Southern Africa is the only real estate company in the country that has a dedicated distressed property department and whose agents are qualified as Certified Distressed Property Advisors (CDPA) who are trained to assist homeowners with these specific types of properties and situations. “Our agents are best positioned to assist homeowners who find themselves in these situations and will help get the home sold quickly if that is the best option for them,” says Goslett.

For those who are unsure of what the correct next step is, Goslett advises that they make use of a professional debt counsellor who can provide further guidance. “A debt counsellor will be able to assist the homeowner in reviewing their finances and can help them submit a proposed repayment plan to the relevant creditors if need be. Ultimately, it is in nobody’s best interest if a homeowner falls behind on repayments. Times are tough; it is commendable if an individual is brave enough to admit that they need help rather than silently bury themselves in debt,” Goslett concludes.