Home Loans

Although economies are climbing out of the recession, the effects are still being felt by those who’ve lost their jobs or received a decrease in pay. That combined with high interest rates has resulted in a large amount of people defaulting on their home loan payments.

Letters of Demand
If you miss one payment, the financier of your home will issue a letter within 7 days of the defaulted payment. This letter will ask you to rectify the situation. If you default two months in a row, you will receive a letter of demand. Some financiers skip the letter and continue directly with legal action.

Debt makes them appear to be an enemy, yet most creditors are accommodating and allow you to make arrangements to pay your arrears. They lose money by entering into legal processes, so save yourself and them by being upfront about your payments.

If the letter of demand is ignored, the bank can issue a summons to begin the process of foreclosure. Foreclosure is the process of repossessing your property. If R100,000 or less is heard, the case will appear before a Magistrate’s Court. If you do not consent to the foreclosure the matter will be taken before the high court.

After the Summons
After you have been served the summons, you are given 5 working days to respond at the Magistrate’s Court or 10 days if being dealt with in the High Court. This is the last opportunity you will have to make arrangements to pay your arrears. If you do not appear, the bank will file a default judgement against you.

If the judgement is passed the sheriff will arrange a sale of execution – meaning your home will be auctioned. By this stage you will have been blacklisted making it impossible to reapply for a home loan elsewhere. If the amount recovered at the auction is less than the outstanding amount you owe, you are still liable to pay the difference and the legal costs incurred.

As the process is costly and everyone loses money, including the financier, the NCR allows for debt counseling. Debt counseling will provide easier repayment terms for you, albeit over a longer period of time. Such counseling could be the difference between foreclosure and a paid-off home.