Struggling to pay your home loan? Here’s what to do

Credit reporting group Experian recently reported that consumers are battling to keep up with their debt repayments and that even first-time defaults are on the rise. 

This is not a surprising fall-out from a weak economy which is manifesting in rising living costs, low salary increases and an increasing threat of retrenchments and rising unemployment.

For most, their monthly rent or home loan repayment is their biggest expense and also the most important as it secures the roof over your head. But what do you do when it becomes difficult to keep up with your monthly rent or home loan repayments? 

Stuart Manning, chief executive of the Seeff Property Group says that the most important thing is to act as soon as you can to minimise the financial risk.

When you can’t pay your rent

A first option could be to look for a flat or house mate to share the costs. If however, this is not possible or there is a broader financial problem, then it is best to speak to your agent or landlord. Inform them of the difficulties that you face and find out if there is a possibility of a rent reduction. Often, a landlord will be willing to drop the rent to keep a good tenant.

If however, you simply cannot find a way to continue with your existing lease and need to downgrade, then you could give 20 business days’ notice in terms of the Consumer Protection Act (CPA), but be mindful that there may well be penalty costs associated with this option.

Be sure to check your lease agreement and always put your cancellation and all correspondence in writing. Your landlord may not withhold your deposit and it must be refunded in terms of the Rental Housing Act, but subject to deduction of maintenance costs which must be proven. Disputes can be referred to the Rental Housing Tribunal.

When you can’t pay your home loan

It is much harder to get out of a home loan contract as the property would need to be sold which will take time. The implications could be significant, and you should act as soon as you realise that keeping up with your monthly repayments has become a challenge. The longer you leave it, the more your liability will pile up.

Start with a call to your home loan provider. They are used to dealing with people in financial difficulty and can assist with providing guidance on a possible solution. This could be a brief suspension of repayments, restructuring of the repayments or a debt consolidation proposal, or a combination of these.

If however, the problem is of a more serious nature, then it may be best to sell the property and rent for a while until your financial position improves. 

If your financial outlook seems bleak, the problem is not just going to go away. The sooner you act, the better chance you have of minimising the financial impact.

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