If you miss one bond repayment, add four months to your mortgage
Missing a bond instalment to fund festive season spending can mean it takes at least four months to catch up. Missed home loan repayments rise on average by more than 10% in December; and there is an 80% higher chance of customers missing a January repayment once they failed to repay December.
This is according to Calvin Ndlovu, head of operations at FNB Home Loans. “We have seen a strong correlation between missing the December payment and the risk of also failing to pay January’s instalment,” he says. “This knock-on effect occurs as consumers are faced with having two bond repayments due in one month, as well as additional expenses such as school fees among other regular financial commitments.”
The bank says about 30% of its home loan customers were paid early in December and to help consumers manage their cash flow, the division said it was running early debit orders, in accordance with the early pay days of South African corporates.
“While customers are welcome to contact the bank to request the debit order runs on the usual date, this may put them in a position where they don’t have enough money for the debit order to run putting them in a risky position from both a financial and credit perspective,” says Ndlovu, noting that customers can call the bank up to four days before their debit order is due and request for a change in debit order.
“We find that customers don’t intentionally use their bond money, however early salary payments and overspending quickly puts consumers into a position where they aren’t able to meet their debt responsibilities at the end of the month,” says Ndlovu, noting that pre-paying into your home loan throughout the year can help you avoid going into default.
“This is a far better and effective option than going into arrears, not only will you save on your credit record but you will also have the advantage of reducing the interest on your capital for the period that you have pre-paid,” says Ndlovu.