How to hold on to your home as interest rates cycle up

BY BONNY FOURIE bronwyn.fourie@inl.co.za AND VIVIAN WARBY vivian.warby@inl.co.za

Six proactive ways to help you take charge and survive these tough times

INTEREST rate hikes are putting financial pressure on homeowners, leaving many struggling to keep up with their home loan repayments and contemplating a forced sale.

The higher interest rate adds pressure to hard-hit households carrying debt and, after the rate hike of 75bp last month, even more will be felt.

However, there are ways to hold on to your status as a homeowner.

Adriaan Goslett, the regional director and CEO of Re/Max of Southern Africa, urged those who bought their homes on the edge of their affordability scale to do the necessary repayment calculations to make sure they can afford the higher repayments.

Consumers and homeowners have had to absorb an additional 2.75% increase since November 2021, says Seeff Property Group chairperson Samuel Seeff.

Some homeowners, who could face losing their homes, are considering their options, including turning to their banks for assistance or selling.

For homeowners in this difficult position, banks and property experts say there are ways to help them either keep their homes or at least retain their titles as homeowners by downscaling to a more affordable property.

Six ways to survive these tough times:

1. Communicate

Banks want to keep people in their homes and so encourage homeowners to contact them when they see they are approaching financial difficulty.

There are proactive measures to identify and assist customers who show signs of financial distress, irrespective of whether the customer has missed a payment.

Contact your banks or home loan providers as soon as you realise you are unable to make payment on your bond. Talk to your bank about the various assistance plans for customers who are in distress.

All banks urge homeowners not to wait until the banks’ collections and recoveries team or department contacts you.

2. Enter into a new agreement

If you, as a homeowner, find you are unable to pay the full instalment on your home loan, contact your home loan provider and inquire about arrangements that could be made.

Since each homeowner’s situation is different, it is important that you seek a way to move forward with the help of your financial institute.

If you are experiencing shortterm distress, you might even be able to negotiate a lower repayment for a short time while you get back on your feet.

The worst-case scenario with the financial crisis you are in being a long-term one, some banks will help you sell your property and find a more affordable home to move into.

Banks will look favourably on clients who contact them first, especially if homeowners confront the debt issue before it escalates. Some initiatives to assist struggling home loan customers include restructuring payments, agreeing to interest-only payments for a time or reducing instalments over a specific period.

3. Consider selling before it is too late

If none of the bank’s options are suitable, homeowners whose accounts are up to date could sell their properties privately or with the assistance of an estate agent. Banks also have assisted sales programmes.

Experts advise you to speak to an experienced agent and get your house on the market. An agent will do their best to get you the best price for your home.

4. Debt-proof your home (those considering buying now)

Before you get to a stage of being pressured, here are some ways to help yourself before you buy a home:

• Pay a larger deposit: Making a bigger down payment will mean buyers will need a smaller home loan and can negotiate for better rates as they’re negotiating from a stronger position.

• Secure a lower interest rate: When applying for a home loan, it’s generally a good idea to shop around to see what the different banks offer – negotiating a low interest rate (when possible) can do much to decrease costs on a month-by-month basis.

• Pay a little extra each month: The more money you can pay into your home loan every month, the better. This can help reduce your loan term and help you pay off your home loan quicker. Even R500 extra a month can make a big difference. Homeowners can also consider making some extra money from their homes by renting out any extra space, agents say.

5. Refinance and consolidate debt

If you have owned your property for some time, you could have plenty of equity and a mortgage broker could consolidate your debts.

6. Consider downsizing or alternative ways of living

If you have more than one property, consider selling one of them.

Or you could find a smaller home in a cheaper neighbourhood and downsize.

You could even rent for a while, or move in with family or friends until you get on your feet. It is not the end of the road. Many people have made the move to alternative ways of living even moving into mobile homes and shared accommodation. And they have done so successfully.