January is a month when most consumers review their budget and plan for the coming year.  Certain monthly debit orders will always take priority and for most this will be your mortgage bond, municipal accounts, groceries and your medical aid.  Most people are under the impression that the only way Banks will foreclose on your property is when you default on your home loan.  Unfortunately this is not the case.  Hereunder we list 5 other situations that could lead to foreclosure on your property.

  1. Failing to pay your taxes.

Failing to pay your monthly rates and taxes account and your income tax can lead to your home being sold at an auction.  The Municipality and/or SARS can take legal action and attach your home.  Unfortunately once this route is taken either by the Municipality or SARS you will always end up paying more than what was originally owed.  The best way to avoid legal action being taken is to reach an agreement with the Municipality and/or SARS to pay off your outstanding account before they approach attorneys.  Even if you decide to sell your property to settle the outstanding costs the Municipality will not issue a clearance certificate (which is required for transfer) unless the full amount owing to them is settled.  SARS also needs to issue the attorneys attending to transfer with a transfer duty clearance certificate and can withhold this document until the attorneys provide them with an undertaking to settle all outstanding amounts on registration.

  1. Failing to pay your monthly sectional title levies or home owner’s association contributions.

Failing to pay your monthly levies can also lead to the Body Corporate or Home Owners attaching your property.  Once the arrear amount is settled the Bank will get the proceeds and if the outstanding home loan could not be settled with the purchase price obtained from the auction you as the consumer will be left paying off your home loan without having the advantage of a property.  Unfortunately sellers whose properties are sold on auction rarely get the market value of the property and this leads to the consumer being worse off than if he sold his property before legal action had been necessary.

  1. Applying for voluntary sequestration

Once you are declared insolvent your assets forms part of your insolvent estate and trustees are appointed to administer it.  They will try to sell your property to settle and pay off your creditors.

  1. Engaging in illegal activities.

If your property was used in the commission of a crime, or believed to have been purchased with the proceeds of crime it can be attached and forfeited to the State.

  1. Standing surety for someone else’s debt, or for the debts of a business.

Once you stand surety for someone and the individual or business you stood surety for defaults you will be liable for the debt owed by him/her or it in your private capacity.  This could lead to your home being attached and sold.  Standing surety for someone should always be carefully considered as the proprietary consequences can be detrimental.

The biggest problem today is that consumers don’t approach their Creditors when their financial situation changes for the worst.  Most people are scared and/or believe they can still fix the problem before it goes too far.  Unfortunately ignoring the telephone calls and letters will only lead to legal action being taken and then you as the consumer end up paying the legal fees too.  When your financial situation requires assistance contact the Bank to discuss the various options available to you.

Here are a few options the Bank will discuss with you depending on your unique situation.

Forbearance

This option can be utilised when you are expecting a lump sum of money coming in i.e. a divorce settlement or retrenchment package.  The Bank can reduce or suspend payments for a period of time and when your money comes in the outstanding amount can be settled.

Repayment plan

You and the Bank will agree on a monthly amount payable which includes a portion of the arrears.

Recapitalisation

This means you and the Bank agree that you will only pay the interest on your home loan for a period of time.  The capital amount outstanding will be added again as agreed at a later stage.  Thus you are given more time to settle your home loan.

Restructuring

Here the Bank restructures and extends the period of your home loan from 20 years to 25 or 30 years.

Most consumers today make use of a mortgage bond when buying a property.  Unfortunately your financial situation can always improve or deteriorate over time.  That is why it is very important to consider whether you really can afford a property when signing the offer to purchase.  Take all things into consideration i.e. municipal charges will vary according to the area, will there be levies payable to a Body Corporate or to a Home Owners Association, and whether you need the services of an armed response company to protect your home and valuables.  Budgeting and being honest with yourself and your family is very important when making that offer to purchase a property and entering into a home loan agreement with the Bank.  You can always upgrade to a better property and area once you are in the position to do so, but recovering from a legal battle with the Banks and having a bad credit record will not be so easy.

Living in a property you can afford and love is definitely the way to kick off a great 2018!

Resources:

  • Online, Private Property articles -“ “How-to-avoid-losing-your-home-when-you-can’t-pay-the-bond”; “5-ways-you-could-lose-your-home”.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

DEBT, BONDS AND PEACE OF MIND.
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