Keeping your head above water - tips for repaying your mortgage

Keeping your head above water - tips for repaying your mortgage

Interest rates have gone up from 10.5% to 15.5% since June 2006 which means that home owners are paying an additional R3 555 on an R1m bond size. This coupled with huge increases in the petrol price and high inflation rates are squeezing disposable income making the average property owner more susceptible to defaulting.

Despite the tough market conditions, property is still seen as one of the best long-term investments and home owners should be doing everything in their power not to default on their monthly bond repayments.

"Home owners are having a rough time keeping up with bond repayments in the current economic slowdown," says Mary-Jane Lefevre, regional property finance manager at ooba (formerly MortgageSA).

The good news is that the market is set to recover in late 2009 with interest rates predicted to drop and the housing market is expected to pick-up. Until then, here are a few tips to keep your head above water and repay your bond each month.

Prioritise your spending

Your car is not as important as your house.

"Unless it is a campervan and you are prepared to move into it permanently, consider buying a smaller, second-hand car," says Lefevre.

This will not only save on repayments and insurance on a cheaper car, but will also save on petrol costs.

"Carefully assess your expenditure, do away with luxury expenses and retain only essential expenditure. When things improve you can always reinstate those luxuries".

Don't hide in the sand

By facing your potential financial difficulties head-on you are more likely to be pro-active and make a plan before you have missed a bond repayment.

"You may now be really starting to feel the pinch and your next bond repayment could be under threat of non payment. You need to talk to your bank straight away, don't delay this discussion" says Lefevre.

Speak to your bank

"Your lender doesn't want your house, they want you to maintain your bond instalments," states Lefevre. "They are open to negotiation and should be contacted as soon as you spot potential trouble on the horizon.

"Banks are open to discussing your bond repayments; however they will want to see a commitment from you to reduce expenditure, particularly luxury expenditure, before they agree on amended repayment figures. Do not expect the bank to reduce instalments, if you are not prepared to reduce non essential expenditure," says Lefevre.

Get financial advice

The cost of a professional financial advisor may end up saving your home. They will be able to objectively look at your finances and suggest alternative ways of saving money.

"Your home is one of your most important assets," concludes Lefevre. "So make a plan to keep up with your repayments during these more difficult times in the short term, and you will be rewarded in the longer-term when the economic conditions improve. Remember you can always get back your luxury items but if your home is repossessed you will find it very difficult to get back into the property market."

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.