QUESTION
My wife and I are really struggling to meet our bond repayments due to the increase in interest rates. We own two properties - the first is our home, which we have lived in for many years, and the second a beach cottage which we acquired in July last year. We have been advised that we will not be able to sell our beach cottage for the amount that we initially paid for it, which means we wouldn’t be able to pay agent’s commission, let alone repay the bond amount in full.I am anxious that the bank might foreclose, and that we might even lose both properties. Is there anything we can do to avoid this?
ANSWER
It is not all doom and gloom. The good news is that the beach cottage was purchased during July last year, which falls within the provisions of the National Credit Act.
This means that you can approach the bank or a debt negotiator to negotiate a repayment plan that will suit your pocket, until such time as interest rates come down or your financial situation improves. Provided you make payments of your bond and other debt strictly in accordance with the agreed upon repayment plan, the bank cannot foreclose on your beach cottage or any of your other assets. This means you can sell your beach cottage at a more opportune time, and perhaps even realise some profit.
As far as your house is concerned, you acquired your house pre-NCA which means that the bank is under no obligation to enter into any discussions with you with regard to a restructuring of your bond payments. Should you fail to pay your bond instalments on your house, they will be entitled to foreclose on your property and sell it in execution.
You may want to consolidate your debt, using your home as security, as there is some equity in it. The banks encourage their clients to speak to them and find a mutually beneficial solution, so speak to your bank manager as soon as possible.