In today’s financial climate in South Africa, many people are finding it harder and harder to meet all their financial obligations. The past few months have seen significant increases in the petrol price as well as V.A.T., which has increased the demands on most wallets. As a consequence, more and more people are finding that they’re just not able to make their required debt repayments, and sometimes can’t even afford to pay their Home Loan/Bond.

If you find yourself in this situation, what next? This article from Fin24: https://www.fin24.com/Money/Property/what-if-you-missed-monthly-bond-repayments-on-your-property-20180530 gives one option – put your house on the market as soon as possible, pay the proceeds from the sale towards the bond, and make an arrangement with the bank for any outstanding amount which the sale didn’t cover. However, is this really the best option? Selling one’s house is a major decision and, like most major decisions, there are many factors to consider, both positive and negative.

There are positives to choosing this option. It makes some sense to have the property on the market before the bond is too far in arrears. Why? Because the further in arrears the bond, the more interest accrues, and the greater the likelihood that the outstanding amount owed on the bond will be more than the purchase price. This would mean that you, the homeowner and bond-holder, will still owe the bank money after the property is sold, and will have to make an arrangement with the bank for settlement of this shortfall.

Another reason to consider selling is, as the article states, the longer you’re in arrears, the more likely the bank is to proceed with legal action and take judgement against you. Once that happens, the judgement is noted on your credit record, and there go your chances of being granted credit. Also, once the bank is granted judgement, their next step is to apply for an Order to auction the property. Once the property has been auctioned and the bank has received the purchase price, they will still hold you, the bond-holder, liable for any shortfall. Thankfully, recent amendments to the Supreme Court Act offer more protection to home-owners, as they require a more rigorous investigation by the Courts before allowing a property to be auctioned (thanks to Quintin Zimmerman of Liddle & Associates, and Michael Lombard of DeRebus Attorneys, http://www.derebus.org.za/amendments-of-rules-in-line-with-constitutional-rights-to-adequate-housing/), but a Writ of Execution against Immovable Property (giving permission for the property to be auctioned) may still be granted.

Then we get to the negatives.

Firstly, let’s assume that you do sell your house and repay your bond. Let’s even assume that you have no shortfall. That’s all good. BUT (and it’s a big “but”), you also have no place to stay. Which means that you’re either going to have to try and find another property to buy, and apply for another Bond, or look for a property to rent. How likely are is it that you’ll find something as good as what you had, and at a similar price?

Secondly, there are a number of additional costs to consider. Pagdens Attorneys have graciously made available some very useful information in this regard here: http://news.pagdens.co.za/2018/05/28/selling-your-property-take-note-of-all-the-costs-involved/

Thirdly, you may place your property on the market, but there are no guarantees as to how long it will take to sell. On top of that, there’s also the time that it takes before transfer can be effected. According to our resident property expert, Clarence from The Property Scout (whom you can find on-line here: http://www.thepropertyscout.co.za/homepage/ ), it can take 30 to 90 days to sell a property (the more expensive properties take longer), and the bank also requires 90 days cancellation notice in writing before they proceed with cancelling the bond. The good estate agents (like The Property Scout) give the bank notice of intention to sell as soon as they sign the mandate, to minimise the waiting period before transfer can be effected but, until transfer goes through, the home-owner is still liable for bond repayments and accrued interest.

So, what other options do you have if you’ve missed a bond payment, or are struggling to meet your debt obligations? It’s definitely worth considering the option of seeing a Debt Counsellor. Placing your property under Debt Review has many positives.

1. The bank – and all your other creditors – are legally obliged to negotiate with the Debt Counsellor to reduce your monthly instalments to an amount that you can afford (but will also still ensure that the outstanding debts is repaid within a reasonable period),
2. Placing the bond under Debt Review automatically restructures any arrears, and allows the Debt Counsellor to make a new arrangement with the bank for the entire outstanding balance,
3. Accounts which are placed under Debt Review are protected from legal action (as we’ve previously discussed here: https://creditbalancingservices.co.za/protection-of-assets/ ), so there’s little risk of you losing the house or having judgement granted against you.

If you HAVE missed one or more bond repayments, let’s not pretend that it’s something that one can just laugh off. You DO have some big decisions to make, but hopefully we’ve provided you with some information which will help you to make an EDUCATED decision, rather than rushing into action that you’ll regret later. To quote an old saying: “Act in haste, repent at leisure”.