Keep calm and avoid reposession of your house

In South Africa it is a real risk that your house will be repossessed by financial institutions and sold on auction if you continuously default on your debt. With thousands of job losses as a result of Covid-19 lockdown and the economic conditions in general, this is a stark reality for many South Africans.

Furthermore, it is in your best interests to keep your credit score as clean as possible for future dealings or accounts.

There are however options available for home owners to protect their assets:

1. Communicate with your bank

The main thing to NOT do is to do nothing – sitting back and just waiting for something to happen is the worst things a debtor can do.  Consumers must realise that it is not in the best interest of a bank to reposes your home taking into account the loss of income on their side together with the added expenses and risk.  Make an appointment with your bank consultant and take all the supporting documentation along to support your case for a request for a payment assistance or extension of your loan period.  

2. Keep paying your bond or debt

Even paying a portion of the instalment is better than nothing at all and will keep the interest on the loan from compounding at a bigger rate.  Furthermore, partial payments are a sign of good faith of your intention to stick to your commitments and will boost your request for a payment holiday or loan extension.

3. Restructure your debt or sell off another asset

If you have various small debts that are taking up all your cash, try to settle the small ones once off or with bigger payments.  It is easier to pay off R2000 than to pay off R200 000.  In some cases it is possible for consumers to sell another asset (e.g. an expensive vehicle) or consolidate all their outstanding debt into one long term payment. Although this is not the ideal situation it is an option that is used from time to time.  Contact your financial advisor or your bond originator to assist with the application process.

4. Rent out your property

As a short-term solution, it is a possibility for your family to downscale to a more affordable rental property or to move in with a family member and utilise the rental income to settle outstanding bond payments.  If you make use of this solution you need to ensure that the rental amount will cover the bond shortfall as well as any possible increase in the bond repayment amount.  It is furthermore crucial to ensure that your prospective tenant has a good credit score and good payment history for previous rentals.  Should you consider this option, contact your estate agent to assist with the rental contract or, alternatively, contact our office to assist with a credit check and rental contract.

5. Sell your property

A good option to keep your credit record in tact and to take charge of your finances is to sell your property BEFORE it gets to the stage of a forced sale or repossession.  In other words, sell the property before the bank takes action against you or sell the property in the period between the bank action and the auction.   Be clever about the sale and appoint an independent estate agent to assist you in the process.  Also, make an informed decision about the listing and selling price of your property.  Yes, you want to get as much money out of the sale and into your pocket but overpricing your property will mean no sale and possibly NO EXTRA MONEY.  Your main concern with a distressed sale is to get the property sold as soon as possible to stop any execution steps against you (this will cost you extra money) and to sell your property.  

If you are in financial distress, contact our office and we shall assist with the planning as well as put you in contact with industry role players that know what they are doing.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)