Real Estate Investor Magazine South Africa October/ November 2019 | Page 34

5
FINANCING
steps to get ahead
of bond repayments
BY SIDIMA MFEKU
Real estate remains a solid investment, but nobody wants to see
themselves cornered by bond repayments. Bond repayment struggles
have become too common in South Africa, but experts say “it doesn’t
have to be the beginning of the end for your home.”
Leonard Kondowe, National Admin
Manager of Rawson Finance, advises on five
steps to take when you find yourself trapped
under the weight of bond repayments:
1
Get in touch with your home loan
financer/bank
It is very tempting as a bondholder to just ignore the
problem and hope that your bank doesn’t notice a
missed payment or two. However, “This is really the worst thing
you can do, delaying the inevitable and putting your lender in
a far less sympathetic position when they eventually contact
you,” says Kondowe.
He adds: “It’s far wiser to approach your bank as soon as
you realise you’re in financial difficulty and leverage their
experience to find a workable solution to tide you over what
is hopefully a temporary financial crisis. Visit your local branch
and sit down with an expert.”
2
Be open and honest about your
situation
Once you’ve found the right person to talk to, it’s
essential to be as open as possible and bring proof
of the issues that are causing your current financial crisis. That
includes documentation of your current income and any job
losses, unexpected expenses or overwhelming debt.
“The most important thing is to be honest – don’t try to
manufacture a fake story for sympathy. Your lender is going
to require proof of any claims you make, and any lies or
embellishments are only going to work against you,” says
Kondowe.
3
Work with your lender to find a
solution
While it’s easy to think of your bank as the enemy,
Kondowe says this is really not the case for
distressed bondholders. He says that banks are not in the
business of repossessing homes, “its far more beneficial for
them to help you over your rough patch, retain a loyal client
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OCTOBER/NOVEMBER 2019 SA Real Estate Investor Magazine
and avoid the moral and legal dilemmas of trying to evict a
person from their home. As such, they really do go the extra
mile to help homeowners find sustainable solutions to their
financial problems.”
The found solutions often vary based on the homeowner’s
specific circumstances. They could include a temporary
or permanent reduction in the home owner’s monthly
repayments, a brief repayment ‘holiday’, a debt consolidation
proposal and many other options.
“In a worst-case scenario, your bank could even assist you
in selling your property for the best possible price by offering
prospective buyers preferential home loan rates.”
4
Understand any long-term effects
on your bond
“No matter what solution you and your bank settle
on, it is important to understand the long-term
effects it will have on your bond. Any reduction in repayments,
unless followed by a proportional increase, will result in an
extension of your overall bond term,” says Kondowe.
This means you’ll be paying more interest in the long-run,
but that amount will vary depending on how much longer
your term is. “Make sure you understand this before signing
on the dotted line and ask about alternatives if you’re not
comfortable with the numbers,” he adds.
5
Stick to your new agreement
Lastly, once your bank has gone to the trouble of
helping you find a solution to your financial crisis,
it’s very important to do your part to stick to the agreement
you made. If not, you could find yourself even worse off and
Kondowe says your bank will be far less likely to be sympathetic
the second time around.
“Remember, you’ll be signing a legal agreement with your
bank and that can have serious consequences if you don’t
uphold your end of the bargain. So, if you have any doubts
about your ability to follow through on the agreement,
rather raise those questions before signing and explore any
alternatives that may be available to you,” concludes Kondowe.