If you are one of that growing number of people who are now having difficulties paying your mortgage bond, Tony Clarke, MD of Rawson Properties, has some advice for you.
“In most cases,” he says, “problems arise because people fail to realise that it is very definitely not in the bank’s interest to take over the home on which the bondholder is having problems meeting his payments. Such people must accept that in nine cases out of ten the bank will prefer to be flexible and accommodating – provided that you go and talk to them and make an arrangement.”
If defaulters see their banks, says Clarke, they will usually be able to negotiate a deal in which the bank allows them to hold back a few monthly payments and/or extend their bond period (from 20 to 30 years in most cases). This can reduce the monthly payments.
Sometimes, said Clarke, it is possible to arrange to continue paying at a lower rate for a year or two, thereby, again, keeping the bond intact but, of course, adding to the interest bill.
In some cases, where bondholders have fixed their debit order payments at an agreed level, now that rates have risen by 3,5%, they are eating into their acquired equity without realising it – and only awaken to the situation when they are penalised for going into debt.
This danger, he says, underlines the basic principle that if it is at all possible, bondholders should pay off their bonds at a rate higher than the minimum rate.
Where a bondholder is in dire straits, said Clarke, it is better for him to sell the property timeously, collect what profit he can and convert to renting rather than to allow the bank to auction the home. At a repossession auction, he said, the home all too often sells for less than its true market value.
“Wherever possible, however,” he advises, “hold on to your property, making big sacrifices to do so. All my experience in home selling shows that cutting back on luxuries to retain your home is the right course to take – do not sell unless you are absolutely forced to.”