Peter Gilmour, Chairman of RE/MAX of Southern Africa, provides solutions for five common questions distressed homeowners ask…
For many, the realities of the economic crisis are only being felt now with many homeowners facing increasingly tough times financially. "Unfortunately the property market is often the first to suffer the consequences of a tough economic climate, often with serious long-term implications for many consumers," says Gilmour. "As economic activity declines, so increasingly more properties enter the foreclosure process. However, all too often, there is such stress and shame surrounding this topic, and even though it is an increasingly common occurrence, many homeowners are not sure how to best handle the complex situation with their lenders."
Gilmour sheds some light on the some of the most common questions defaulting homeowners are asking:
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.
Article continues on page two and three: benefits of "debt review" and "administration"; selling property to cover debt; sequestration; some dos and don'ts of handling this situation...