The impact of COVID-19 has left many desperate for help and unable to pay their home loans. While for some, it may simply be a matter of readjusting certain behaviours to rectify their financial situation, others may find themselves in more dire circumstances.
The best advice is to avoid feeling so shameful about your financial distress that you avoid asking for help. Homeowners in financial trouble need to take immediate action and proceed with the necessary steps before the situation slips out of your control.
Here is how to handle this often complex situation:
Evaluate your situation
Be honest with yourself and look at your circumstance objectively to determine whether you can continue to pay your bond. If you can no longer afford it, notify your lender as soon as possible. Avoiding the situation and doing nothing is the worst possible decision you can make. It is best to be upfront with the bank and tell them the situation, rather than defaulting on a payment without notification. If the situation is left to run its course, it will not only result in you losing your property; it will also lead to a tarnished credit record and blacklisting. A blacklisting will leave you unable to obtain any credit for the next five to 10 years, which means that even renting a property will become difficult because most landlords do credit checks on their potential tenants.
Communicate with your bank
Counter to what many may believe, the bank will not repossess your property as soon as you communicate your distress. Banks want the homeowner to keep their property and will try to assist where possible, but the only way they can help is if they are aware of the situation. There a few ways that the bank can help, such as rescheduling debt, offering some advice on the right steps to take or renegotiating the term of the loan from 20 years to 30 years. Once you let the lender know about your financial situation, the bank will be able to offer solutions.
Reach out to a debt counsellor
If the situation has reached the point where you can no longer handle the debt by yourself, make use of a professional debt counsellor who can provide guidance. They can help you in reviewing your finances and submitting a proposed repayment plan to the relevant creditors. An application will be made in court to have the proposal granted. Once the proposal is granted, creditors will not be able to proceed with legal action and the bank will not be able to repossess the property. If it seems as though the homeowner’s circumstances are not likely to change, they can opt to be placed under administration rather than debt review. Just be aware that in this case, the property can be repossessed to mitigate the debt.
Sell the distressed property
If you do not see a way out of your financial situation, opt to consult with a real estate company that specialises in the sale of distressed properties, like RE/MAX. RE/MAX of Southern Africa is the only real estate company in the country that has a dedicated distressed property department and Certified Distressed Property Advisor (CDPA) qualified agents that are trained to assist homeowners with these specific types of properties and situations. We work with the banks to sell distressed properties at market-related prices. If you would like to keep your credit record intact, the most effective method of doing so is selling the property and recovering from the financial crisis. If you have built up enough equity, you may be able to cover not only your remaining bond amount but also some other debts as well. Essentially, this option could provide you with an opportunity to start again with a clean slate.
If you see no other way out, reach out to your nearest RE/MAX Office and speak to one of our Certified Distressed Property Advisors today.