1.)   I can’t afford to pay my bond anymore – what should I do?

The thought of the bank foreclosing on you and losing your house can be a very emotionally traumatic issue. So traumatic, in fact, that many homeowners feel that they are doomed no matter what they do and so they just give up and do nothing; purposefully defaulting on their mortgage. However, this is the absolute worst thing that they could do as there are always proactive things that can be done to better the situation.

Leaving the situation to run its course is tantamount to financial suicide as it will not only result in losing your home, but it will also lead to a bad credit record and being black listed.  Consumers with bad credit records, or who are black-listed, are normally banned from the lending industry for five to 10 years which means that not only will they be declined for any type of credit application, but they will even find it difficult to rent a home as the majority of landlords run credit checks on their prospective clients.

The best thing to do in these circumstances is to take immediate action – accept responsibility, take control of the situation, consult broadly and act decisively.

2.)   Should I communicate my financial situation with my bank?

Yes – it is highly advisable to contact your bank and let them know your situation as they may be able to help you and will be more sympathetic with you when dealing with the problem.

Most banks have recognised the dire economic times we are living in and the majority of them are bending over backwards to reschedule debt and help homeowners keep their homes. For example, you might be able to negotiate what is called a “holiday period” which is normally a three to six month period where you don’t have to pay any instalments. This will offer you a short-term solution to your problem with the hope that you will be back on your feet once the holiday period is over.

Alternatively, you could perhaps negotiate a longer bond term – in other words, instead of paying your bond off in 20 years you can pay it off in 30 years, which should decrease your monthly repayments.

If you are not sure about how to approach your bank, or you would like to explore further options, you should contact a professional debt counsellor who should be able to help you “get your ducks in a row” so to speak.

3.)   What are the benefits of going under debt review and going under administration?

       Debt Review

A professional debt counsellor will review your situation with you, submit a proposed payment plan to all your creditors and apply to court to have this proposal granted. Once you have applied for this process, all creditors must cease legal proceedings against you and participate in the process and the bank cannot repossess your house.

       Administration

A process that is very similar to that of debt review, but it is viewed as a more permanent measure. Unlike debt review, which assumes that your debt is a temporary crisis, administration assumes that the situation will not be remedied in the short-term and hence longer-term settlements will be negotiated with your creditors.

Here, your property will be repossessed to help settle your debt.

4.)   Can I sell my property to cover my debt?

There are many cases where the debt burden is just too big for borrowers to manage and in these cases the best chance of recovery and keeping their credit rating intact is to sell their property and use the proceeds to cover their debt. That is to say, as long there is enough equity in your property to cover the outstanding bond amount. Such a sale would release you from any debt obligations and allow you to re-establish your credit faster and enter the market again much wiser.

If a homeowner continually fails to pay the home loan instalments to the point where the home loan is cancelled by the financial institution, the home will be repossessed. However, in an effort to assist homeowners who are no longer able to afford their bond repayments, the banks are now selling these distressed properties through reputable estate agents for a market-related price. RE/MAX of Southern Africa, for example, is currently working with First National Bank, Standard Bank and Nedbank to sell their distressed properties. There is a dedicated RE/MAX assisted sales department that manages approximately 200 distressed sale leads per month with an 80 percent success rate. These properties are sold, on average, within 30 to 45 days and, on average, also achieve more than 85 percent of the asking price, which could mean a quick solution for many homeowners to a stressful and complex problem.

5.)   When, if ever, should I consider sequestration?

When you are sequestrated, all debt is written off. If there is really no light at the end of the tunnel and there is no way you can possibly find your way past the debt, then you can consider sequestration. However, it should be seen as a last resort as it will leave you with seriously negative financial ramifications with regards to being blacklisted and not being able to start a new business for up to 10 years.

6.)   What are the dos and don’ts of handling such a crisis?

• Speak to your experienced property consultant or bank as soon as you can – don’t wait until you’ve built up a really big outstanding amount.
• Proactively discussing the situation with your experienced property consultant and working with them to find a resolution is always better than giving up and doing nothing at all.
• If you find you can’t make your payments, visit a debt counsellor and seek advice on how to tackle the problem.
• Don’t make false promises to catch up and never ignore the situation as it will lead to legal action.  Once a judgement is made against your name the bank is entitled to sell or auction your home without your permission.
• Do not take on more debt in order to finance your home loan.

7.)  Debt Consolidation Home Loan

A home loan is secured against your property and carries one of the lowest
interest rates. The aim of debt consolidation is to increase the amount of the
existing home loan and use this amount to settle your debts. This should
improve your monthly cash flow due to the lower interest rates and finance
charges offered on home loans.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

What is a mortgage? - www.mortgagepluscc.co.za

• A mortgage is a loan that is secured on immovable property, normally your home, hence the term “home loan”.
• The mortgage is lent to you in a lump sum to pay for the property and is legally bound to the property by the attorneys who register your mortgage bond. You then have to pay back this mortgage over a given length of time.
• This time period is usually 20 years, but it can vary between 5 and 30 years depending on circumstances.
• If you don’t make payments as agreed, the lender has the right to sell your property in order to recover their money. This is rare but it is important to understand from the outset that if you do not keep up with your mortgage payments you are at risk of losing your home. 

How much can I borrow for a mortgage? – Affordability Calculator

• This is often one of the first questions to be asked.
• Unfortunately it is not an exact science and all banks have their own methods to calculate affordability.
• Since the introduction of the National Credit Act this has become more complicated.
• The most accurate method of establishing how much you are eligible to borrow is to contact your Mortgage Plus Bond consultant.

• Generally the larger the deposit (as a percentage of the value of your house), the better the interest rate you can negotiate with the bank.
• This is because the lenders know that if you default on your loan and they repossess the property, there is more chance of them getting their money back on the sale of the property. Hence there is less risk to the lender.
• The larger the deposit you put down, the lower the rate of interest you are likely to get.
• A larger deposit also reduces the risk of you going into negative equity, where the value of your house falls below that of your mortgage. This makes it difficult to sell your house because the proceeds won’t cover the debt you owe. 

The main additional costs are:
• Transfer fees
• Conveyance fees
• Bond registration fees
• Valuation fees
• Initiation fees

• Mortgage brokers are paid a commission by the lender for every mortgage organised on behalf of their clients. A mortgage broker should not charge their client a fee.
• As a client, always ask your mortgage broker about their commission relationships with lenders. Good brokers will always disclose this information.
• You will require significant additional funds to cover the deposit and fees. Remember to include these costs when calculating how much you can afford to spend on a house.

How much will my mortgage interest rate be?

Your mortgage interest rate will depend on a number of factors such as:
• The loan to value ratio (the size of your mortgage compared to the price of the house you are buying or own).
• Your repayment to income ratio (the cost of your monthly mortgage repayment to your gross monthly income).
• The size of your bond.
• Your credit profile.
• Contact your Smartbridge mortgage consultant for advice on your likely interest rate.
• The interest rate charged on your mortgage is crucial. It will determine how much you can afford to borrow and therefore how much you can afford to spend on a house

Your maximum monthly mortgage payment is based on your monthly disposable income. To calculate your monthly disposable income: • Subtract all your deductions such as tax and UIF from your gross income to get your net income. • Calculate your total monthly expenses, such as groceries, car insurance etc. • Subtract your monthly expenses and existing debt such as credit card, vehicle finance, or loan repayments from your net income. • The balance (if there is any) is your potential maximum monthly mortgage payment.

I have additional sources of income, how will this affect my mortgage application?

• Lenders will take into account additional income you may have such as rental income, investments and dividends etc. • Lenders vary in how they view additional income streams. • Contact a Mortgage Plus consultant to assess and discuss your options.

Can family members make a contribution to my mortgage application?

• Yes.

• You can take into account contributions from family members if they are living on your property. • If a partner or child is making a contribution to the family finances, then the banks will recognise it. • It is your responsibility, as the borrower, to prove these family contributions.

Is my annual bonus taken into account in my mortgage application?

• Yes.

• Annual bonuses are taken into account but you will have to prove them with entries on your bank statements and letters from your employer.