16/10/2017 16:05 SAST | Updated 16/10/2017 16:05 SAST

Your House Need Not Be Repossessed -- Here's How You Can Keep It Through A Financial Difficulty

Your lender may allow you to reduce or suspend payments for a short period of time.

A foreclosure sign in front of a family home.
BackyardProduction via Getty Images
A foreclosure sign in front of a family home.

Financial difficulties arising from an unexpected illness, retrenchment, over-indebtedness, divorce or even death can cause you to fall behind on your monthly bond repayments -- threatening the security of your home.

However, there are options that can help you keep your home.

The first thing to do is speak to your bank immediately, advises Shaun Rademeyer, the CEO of bond originator Betterbond.

"The banks have heard it all before and most of them would much rather make some sort of plan to help you in your home than go through the process of getting a debt judgement against you." Rademeyer calls this process "an expensive option for banks as well as borrowers".

Here's how banks can help you:

1. Forbearance

Your lender may allow you to reduce or suspend payments for a short period if you can prove that you are expecting an insurance pay-out, a retrenchment package or a divorce settlement. This will enable you to catch up what you owe.

2. Repayment plan

Your lender may also be prepared to let you make regular payments plus a portion of the outstanding amount each month until you catch up.

3. Recapitalisation

Until your financial situation improves, your lender may agree that you only pay the interest portion of your home loan instalment each month until your financial situation improves. However, the capital portion will be added back to your loan, which will cause you to take longer to pay it off.

4. Restructuring

There is also an option to restructure your loan, by extending the loan period from 20 to 25 or 30 years. Your lender could help you to lower the minimum amount you need to pay each month, which might give you a breather through the period of your financial difficulty.

Rademeyer emphasised, however, that these options are available to people who act immediately on their financial situation, not those who bury their heads in the sand. "If your lender does contact you about outstanding payments, but you don't react, the lender will go ahead and take legal action."

This might negatively affect your credit rating, resulting in you getting blacklisted.

READ: Why It's Important To Know Your Credit Score

He also notes, however, that some financial problems are likely to be much more long-term, which may result in the consumer needing to sell the property to pay off the home loan and keep their credit record intact. "Banks have assisted-sale programmes for borrowers who find themselves in this situation and will put you in touch with reputable agents who will take you through the process."