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You must tell bank of financial stress

19 Jun 2014

While the general economic climate and the property market is improving slowly, there are still those who are finding themselves in financial distress and cannot pay their bond repayments each month in full. If and when this happens, they must contact the bank that holds the mortgage immediately and not wait until letters of demand or legal notices arrive, as this may be too late.

Homeowners in distress should contact all creditors before the letters of demand start arriving. Creditors are not sympathetic to a person’s plight if they are the ones having to follow up on payments.

This is according to Annette Evans, regional general manager for the Institute of Estate Agents, Western Cape, who says all bonds are granted on the basis of the financial conditions of the applicant at the time of applying, so if these circumstances should change, where the person is earning less or they have lost their job, they must let their bank know immediately.

Most banks are amenable to making payment arrangements and assisting those in financial difficulty, as long as they are contacted first and it is not the bank having to ‘chase’ payments from the bond payer.

The banks will sometimes offer ‘payment holidays’ where up to six months’ of half payments or three months’ grace can be given to those who are struggling to pay their monthly bond repayments.

She says do not wait until a legal notice arrives, because (a) you will be paying collection attorneys’ fees and (b) they will not be likely to discuss things or negotiate a repayment plan.

It is better to sell the house before any chance of legal collections begin as this will enable the owner to sell at a market related price, instead of a much lower price being achieved if the property is sold by the bank. The owner might find himself still owing the bank money even after his property has been repossessed and sold in execution, says Evans.

Another option to get one’s debt and finances in control is to consult a debt counsellor, who will write to all creditors and make payment arrangements on the debtor’s behalf. They will, however, charge a fee, so if at all possible, she advises that homeowners in distress contact all creditors before the letters of demand start arriving. Creditors are not sympathetic to a person’s plight if they are the ones having to follow up on payments.

“Rather stay proactive and as much as possible in control of the process of selling the property and settling debts, than putting it in the hands of others, and never wait for a desperate situation before asking for help,” says Evans.

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