Posted by Poenie van den Berg - WKH Legal Practitioners on 27 Feb 19
Due to general increase in the cost of living, home owners and property investors are finding it increasingly difficult to keep up with their home loan repayments. To add to the trauma, these owners are also finding it difficult to sell their properties in order to get out of debt.
Before you throw in the towel and physically take your front door keys to the bank manager, make an appointment to see him or her in order to discuss whether the bank is willing to re-negotiate the terms of your repayments.
The bank is not in the business of repossessing houses. Neither is the bank in the business of blacklisting its valued clients. Although the banks do not tolerate non-payment of credit agreements and have the resources to take legal action when you default, they are also there to assist you in solving a problem when it comes to your debt. It is a very costly exercise to take legal action against clients.
The bank’s procedures in taking legal action against you: Each bank has a different method and different departments, using different terminology, but in general they all use a similar procedure when taking legal action. Generally, if you are in arrears of between 1-6 months on your payments, the bank will contact you and try to get a commitment from you to make the payments. If this commitment is not honoured 3 times in a row, the bank will start legal proceedings.
Approach your bank for help before you default on your payments. You may find that your bank is willing to help you if you are experiencing temporary financial difficulty. There are many factors that will be taken into account when the bank analyses your financial situation which may include your relationship history with the bank, your credit history and current credit exposure.
Important tips for approaching your bank:
·Do not wait too long before acting on the problem. You should contact your bank as soon as the problem arises.
·Keep in mind that the person who is making the decision on whether to help or not, is also human and will probably do everything in his power to try to help you.
·Your frustration, fear, humiliation and emotions may be very high at the time of communicating with your bank. Remember that it is not the bank’s fault you cannot afford your debt.
What kind of “plan” can the bank make for you? There are many ways in which the bank could assist you during difficult times. They may extend your loan term to 30 years, which is not favourable for you in the long run as you will have paid a lot more interest at full term but it may give you the break you need. The bank may even be able to give you a “holiday” period, whereby they arrange that you don’t have to pay your bond for a certain period, i.e. 3 or 6 months. Be aware that interest will still be calculated on your outstanding home loan amount which could result in higher repayments once the “holiday” is over.
After improving your financial position, it is advisable to restructure your bond, back to the term that it was prior to your financial difficulty and catch up on the shortfall.
For more legal advise please contact WKH Legal Practitioners at 061 275 550 or visit their website.