For most people, your home is the biggest asset you will own in your lifetime
and one with the most potential to create long-term wealth, if handled correctly. Not fulfilling
your bond repayments will not only jeopardise this important asset, but can
also have an adverse effect on your entire financial life including your credit
record.
“Purchasing and owning a home is a good way to build wealth, however
home-owners need to make every provision possible to repay their bonds, even
when faced with financial difficulties”, said Thomas Slabbert Head of FNB Home
loans. There are a number of serious consequences to defaulting on your home
loan.
(Photograph: Thomas Slabbert, Head: FNB Home Loans)
Defaulting on your home loan negatively impacts your credit profile, and
since bond payments are an important installment the weight of defaulting is
quite serious. “Once you have a negative credit profile you may find this affecting
your life in other ways, such as difficulty in finding employment as many
employers do some credit checks before employing someone,” warned Slabbert.
The
judgment remains attached to your profile for five years, making qualifying for
simple things such as a cell phone contract, credit card or short-term loan
very difficult in that period. Other major issues that arise out of defaulting
on bond payments include the high cost of legal fees. If a home loan account is
three months in arrears institutions will usually start with some sort of legal
action.
(Photograph courtesy of www.myproperty.com.na )
“You, as the home owner, are responsible for these legal fees which can
run up to thousands of dollars if a bank needs to take a judgment against you,”
says Slabbert. In the worse situations, your property could end up on auction if you
are unable to settle the arrears. This is a lengthy process and just because
the house is sold, won’t mean that you still don’t owe money. “The home owner will still be liable for any outstanding balance if
there is a shortfall after sale,” warns Slabbert. “This means that not only
have you lost your asset, and your home, but you still owe the remaining
balance to the bank.”
There are a few ways to ensure that you protect your biggest asset.
(Photograph courtesy of www.myproperty.com.na )
“Budgeting is imperative; your bond is one of the first payments
that need to be made in the month,” says Slabbert. “One of the ways in
which to make sure that you are not tempted to miss a payment is to use a
salary deduction. Another way is a debit order as soon as your salary comes in,
this saves you time at the bank and by coming off on the day your salary hits
your bank account will ensure that you know exactly what you have left for the
month after your house is paid.”
(Photograph courtesy of www.myproperty.com.na )
If you are able, put a bit extra into your bond when you have spare
cash, not only will this create a buffer, but will save you in the long run in
interest over the life of your bond. For instance, if your bond is N$400 000 and you put only N$100
extra into it each month, you will save around N$ 48 800 and settle your bond a
year and a half early. Finally, admitting you need help as soon as you realise that you are
heading into financial difficulty will go a long way to protecting your home.
“Your bank will make provisions for you to ensure that you keep your
home. Repossession is the last resort and a bank will assist you in every
possible way to ensure that this doesn’t happen." Slabbert stressed.
“There are a number of solutions that FNB can offer to help you if you
are having financial difficulties, however it is up to you to also proactively
take steps to help yourself out of the position you have found yourself in, in
the first place ,”concluded Slabbert.
(Photograph courtesy of www.myproperty.com.na )
Comments
Post a Comment