What happens if you can’t pay your bond

Article summary

• It’s not the end. You have options available to you if you can’t repay your bond.
• Your bank may be willing to grant you an extension on the loan, or even a period of reprieve during which you don’t need to make repayments.
• Act quickly, and be open and honest when negotiating with your bank.

It’s a nightmare come true. You’ve secured your dream home but are now behind on bond repayments. What do you do?

Thankfully, you do have options. It’s not the end. Here are some of the resources available to you.

Note You should avoid getting into such a situation in the first place by budgeting correctly. You can use our Bond Repayment Calculator to determine what bond you can afford and what you will have to pay monthly.

Your options if you can’t repay your bond

1. Extend your loan.
2. Ask for a period of reprieve.
3. Credit insurance.

All of these options involve negotiating with your bank. You should be open and honest with your bank. Like you, they’d prefer to avoid the legal entanglements of an unpaid bond.

The bank usually sends about three warnings regarding bond arrears and then gives you a 30-day period to resolve the issue.

1. Extend your loan

• The bank may be willing to extend your loan for up to 30 years.
• This means more payments in the long term, but it gives you the breathing room you need right now.

2. Holiday period

• This is the term for a period of reprieve in which you won’t have to make bond repayments.
• This could be a period of several months.
• The interest will build up, but you have time to get your finances in order.

3. Credit Insurance

• Credit insurance covers you in the event of death, disability, or inability to earn income.
• Banks might make credit insurance a compulsory condition of granting a home loan, depending on your credit score.
• The insurance company will make payments in a case where you are involuntarily unemployed.
• Credit insurance premiums are usually included in the monthly repayments of a home loan.

The last resort: sell your home

It’s a sad thing to consider, but it will save you from homelessness.

It’s best to pursue this option before the bank begins to take legal action against you, which usually follows three warnings and a 30-day period.

An estate agent can help you sell the home for as close to its market value as possible, and you can use the funds received to pay off outstanding debt.