How to avoid defaulting on your bond repayments

How to aviod defaulting on your bond repayment

Rising interest rates, rampant petrol price increases and soaring food prices are putting the pinch on consumers' pockets and threatening their ability to repay their home loans.

But Stef Fourie, the Managing Executive of Property Finance for ooba (formerly MortgageSA), says that although South Africans are facing much tougher economic conditions than they have for years, they should do all they can to hang on to their houses as it's one of the best investments anyone can ever make.

"If you are struggling to pay your mortgage, these are some things which can make meeting your bond repayments easier to meet."

1. Renegotiate your home loan rate

This is perhaps the easiest and most effective method to put more money back in your pocket. Homeowners forget that as prices of their homes rise over time, the ratio of the outstanding amount owing to the house's value drops making you less of a risk to the lending bank. This will put you in a strong position to negotiate a better rate which can shave hundreds of rand off your monthly repayments. Struggling or not, ooba advises that it is always worth trying to get a better rate.

2. Extend your mortgage term

If your monthly mortgage payments are getting on top of you, consider extending your mortgage term. By doing this you will see your monthly payments reduce. The downside is that you will end up paying more interest in the long term. However, if it means you are able to continue meeting the minimum mortgage payments, it is worth doing.

3. Buy a cheaper car

It's a bit of a South African syndrome to buy expensive cars on credit. The thing is that cars are a depreciating asset whereas a property's value increases over time. It may be worth considering trading in an expensive car for a more modest set of wheels, freeing up money for home loan repayments.

4. Trim the luxuries

If you are struggling to pay your mortgage, don't bury your head in the sand hoping it will go away. Instead, ooba suggests you take a calm and reflective view of your financial situation. Look very closely at other areas of expenditure you might be able to trim. For example DSTV costs, and eating out regularly can easily cost more that R1000 a month.

5. Take in a lodger

Taking in a lodger is not as bad as some people think. If you have a spare room, the extra income could be up to 50% of your bond payment. There is some inconvenience, but it is a small price to pay for the extra income. If you are uncertain about taking in an extra lodger, remember, you are able to choose who lives with you. Make sure you meet them before they enter.

6. Payment holidays

If you are in difficulty it is best to ring your bank and explain the situation before you go into arrears. They may be able to make some temporary allowances. However, this does not tackle the fundamental problem.

7. Downsize 

This option is probably the most drastic and only for when the others have failed. If you are able to sell your house, you can temporarily rent somewhere cheaper or buy a cheaper house in a different location. The money saved can be used to pay off your mortgage. This option is not easy, due to the costs involved in moving, but it might be worth doing in the long term.

Hello ooba news

ooba (formerly MortgageSA) welcomed the 0.5% interest rate cut announced yesterday by the South African Reserve Bank which will save South African home owners an estimated R259m in home loan repayments each month, but says more cuts are needed.

According to a new poll by South Africa's leading property listings website, nearly a third of home hunters decide that a property is right for them before they even enter the house - and a kitchen is overwhelmingly the most important room when it comes to the buying decision.

Propertygenie.co.za has entered into a partnership with fractionalownership.co.za to provide access to the latest fractional ownership listings which will be available from the 12 December, 2008.

South Africans spent over R10 billion during the festive season last year. This year ooba suggests carefully planning your holiday season spending to avoid a financial hangover in January 2009. "Festive season debt can take months to pay off in the new year," says Jenny Rushin, Provincial Sales Manager for ooba (formerly MortgageSA).

Weak economic conditions, higher interest rates and the global credit crisis have forced banks to be far more picky about who they will lend money and less generous with their lending rates. But Mary Jane Lefevre, Regional Sales Manager of ooba, said that before you apply for a home loan, there are steps you can take to improve your credit status and encourage lenders to look more favourably on your application.