Hold on to your home

Soaring fuel and food prices together with high interest rates have resulted in many South Africans struggling to keep up with bond repayments. Deon Lessing, marketing director at Betterbond, provides some useful hints on how homeowners can continue repaying their mortgages under the current market conditions:

• Trim the unnecessary. Homeowners should scrutinise their spending patterns and eliminate anything that isn’t necessary. Homeowners should also consider getting updated quotes for services and insurance.

• Trade down. In opting for a less flashy vehicle, homeowners may find themselves spending far less on services as well as fuel each month. The extra cash can be very helpful towards monthly bond repayments.

• Eradicate other debt. Car loans and credit card debt are extremely expensive. Homeowners should try to get rid of these debts as quickly as possible. It is important never to borrow money to cover day to day living expenses.

• Don’t skip. It is essential that homeowners don’t miss any bond repayments as missing even just one payment can dramatically increase the interest bill. Missing payments will also put the person in a bad position with the bank in terms of credit ratings for obtaining future loans.

• Seek a lower interest rate. A lower interest rate means a lower monthly instalment. It is also important to remember that switching involves costs. All costs are normally included in the new home loan, but can be paid separately. Talk to your own bank before switching.

• Increase the loan period. A useful tactic to decrease monthly bond repayments is increasing the repayment period from 20 to 30 years. Although the longer term does mean that the interest increases in the long term, once a homeowner’s financial situation improves or the interest rates decrease, extra payments can be made which will cut the interest charges.

• Consolidate. Home loans have lower interest rates than other debt. It is therefore wise to consolidate all other debt into the home loan. When considering debt consolidation, it is essential to check that the interest rate that will be charged is lower than the total on your individual accounts. Mortgage originators can be of great assistance when shopping around for the best rate.

• Interest only. A popular method of surviving the current financial strains is to only pay the interest on a home loan. This is, however, not the best approach from a long-term perspective, but is helpful in the short term.

  Homeowners should bear in mind throughout these difficult economic times that the quicker a home loan is paid off, the less interest will be charged. Therefore, whenever possible, extra funds should be paid into the home loan.

  

  

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