Do whatever it takes to keep your home

Homeowners should do all they can to hang on to their properties, notwithstanding the interest rate increases that have raised bond repayments by hundreds and even thousands of rands since June last year.

RealNet property group CEO Tjaart van der Walt says that as in all markets, interest rates will fall again, possibly as soon as next year and homeowners who sell in haste now will "repent at leisure".

"Our take on the market is that panic selling has been minimal. If homeowners do come under pressure, however, they can attack the problem with measures such as reducing household expenses, selling off depreciating items, renegotiating payment terms with their bank and renegotiating all sorts of short-term debt such as clothing and furniture.

"Although this is expensive, it's all about cash flow in the short term - and banks would much rather have an asset that's producing an income, even a reduced one, than have to repossess a property and dispose of it in a soft market where bargain hunters are hovering."

Van der Walt says homeowners need to look at their monthly costs. A 20-year homeloan of R750 000 was costing around R7995/pm before the start of the interest rates increases in mid-2006. Now it costs some R9053/pm - or R1058 more.

"However with an extended repayment period of say, 25 years, the monthly payment would reduce to R7620/pm, and over 30 years to R7425/pm, actually less than the homeowner was originally paying before the interest rate increases.

"The danger, of course, is that the total interest owing increases significantly when one extends the loan repayment period, so homeowners will need to re-instate the original conditions as soon as possible after interest rates drop back to lower levels."

Banks see home repossessions as a last resort, he says, and so should consumers, if only to avoid a judgment that could restrict their access to credit in the future. They should also be looking to build up equity in their properties, which is a medium to long-term proposition.

"Also, sales volumes may be down in the lower to medium price home brackets, but prices are still increasing on average, so selling now and trying to get back into the market later is therefore not a good idea."
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