When we buy our homes it’s done with happy thoughts of family gatherings and future grandchildren sleeping over. A home is the largest, most important asset owned by most families, something people view as a legacy to be passed on to future generations.
But what happens when, due to financial circumstances, your home loan repayments become difficult to maintain?
Steven Barker, head of home loans at Standard Bank, says that in this case you should immediately seek the advice and support of your bank. “The fact that you can’t pay all that is due is generally a sign of things to come,” says Barker. “Ignoring the problem for 30 days just means that next month you owe two full instalments, miss a payment for the second month in a row and the situation gets worse with interest payments costing more.”
Not taking steps to consult with your bank can be devastating for your financial situation. Barker explains that the legal process of repossessing a home begins within 60 to 90 days of a home loan falling into serious arrears. If your home is sold at an auction and does not reach the full amount owing, you will be held liable for the shortfall. Legal action can be instituted by your bank to get back the money and the associated legal costs.
According to Barker, if you contact your bank when you find yourself in temporary financial stress, the bank may help you by arranging a partial payment of the amount owing. This is offset against the interest owing so the overall debt does not grow rapidly due to compound interest.
You could also investigate rescheduling your home loan. This assists by reducing the monthly financial commitment but the period to pay off the home loan would then increase.
Worst case scenario is that your bank finds that you are simply not able to meet your financial obligations, steps will then be taken to help you sell your home. In this case your bank will likely employ the services of an estate agent, ensuring that the best price possible is obtained. If there is still money outstanding you will sign an acknowledgement of debt and arrange to pay off the balance.
The silver lining is that large legal fees are not incurred and, best of all; you will have no judgement against your credit record, enabling you to continue with your life.