How To Keep The Roof Over Your Head In The Midst Of A Financial Crisis

Life is unpredictable, and many issues causing drastic change that demand hefty finances can stem out of nowhere, leaving homeowners in a position where they can no longer afford their homes. The three most common causes of a financial crisis are medical bills, job loss, and consumer debt. Below, you can familiarise yourself with the options you have in order to hold on to your home in the event of financial hardships.

Facing The Bank

Many homeowners are crippled with fear by the thought of the bank repossessing their homes, however, they fail to realise that there are plenty of measures they can take by working hand-in-hand with them to keep the roof over their heads when facing unforeseen financial difficulties. The trick is to not be consumed with hopes that things will get better by just holding on and not taking the initiative to keep your head above the water. In order to avoid the high tide approaching, it’s best to contact your bank as soon as you see the problem on the horizon so that they can hit the ground running in assisting you. Bear in mind that you need to instantly become proactive; the foreclosure clock will usually start ticking immediately after three months of missed payments, and the countdown to it will be a parallel path running beside whichever solution you choose to take in an effort to keep your home.

The Bank’s Procedures Regarding Missed Payments

Your bank is not in the business of repossessing homes or blacklisting their valued clients, therefore they would much rather help you come up with a solution to keep your home than go through legal procedures that cost them both time and money; so the sooner you try to resolve your financial difficulties with them, the easier it will become to get through it. Typically, if you are in arrears between one to six months, the bank will contact you to make an arrangement for you to pay whatever is outstanding; however, if you fail to honour the commitment you made three times in a row, it will get handed over to another department in which case you will be given plus-minus thirty days to resolve the issue. If you fail to do this, the bank will begin legal proceedings, and their legal department will arrange for you to sign a power of attorney in favour of them to advertise or sell your property if you do not choose to independently list it.

How To Approach The Bank For Assistance

We cannot stress enough that you need to be mindful of the consequence that the later you address the problem, the less accommodating the bank will be. Before you give up and literally hand your keys over to the bank manager, make an appointment to meet with them and discuss the situation in order to see if the bank may be prepared to renegotiate the terms of your bond repayment before you miss your first installment. Don’t let humiliation hold you back from asking for help; you’re not the first person to run into financial obstacles, and whatever the reason may be, they have heard it all before. It’s crucial for you to remember that it isn’t the bank’s fault that you can no longer afford your home; so when approaching them for assistance, avoid being hostile even though your emotions may be at an all-time high. They understand that the reality of your circumstances can be frightening and they are most likely going to do everything in their power to help you.

How The Bank Can Assist You

Many factors are taken into consideration when the bank analyses your financial situation to determine how viable their assistance will be in the long run. These factors include the history of your relationship with them in terms of how long you’ve been a client of theirs, how your accounts have been managed previously, as well as your credit rating and the extent of your current financial difficulty.

In order for the bank to help you, they will be reluctant to do so unless you prove that your predicament is just temporary and that you are making an effort to resolve it. You, therefore, need to show them your income and expenses, the bare minimum you need for necessities, and how much you'll be able to pay in the interim in order to catch up with your repayments. The bank or mortgage company may be willing to temporarily suspend or reduce your monthly repayments provided that you can prove you’re expecting an insurance payout, retrenchment package or divorce settlement that is substantial enough to help you get back on your feet financially in the near future.

If you fail to make the first move and your lender contacts you first, you need to respond with immediate effect; at this stage, there is still time for you to negotiate alternative arrangements, albeit, it will become a tougher race against time. Banks can also offer you plans that involve you extending the period of your loan; for example, you can choose to pay it over an extra 5 years. Although it may give you the break that you need, proceed with caution as it may hurt as much as it helps in the long run. There are plenty of other options your bank will be willing to assist you with and its best to speak to them directly to explore these. We advise that you go back to your original payment plan as soon as your financial situation improves so that you don’t end up paying the long-term price.

Attractive Debt “Solutions” You Need To Avoid

It’s best to resist any temptation that will get you deeper into debt. Don’t fall into the trap of debt consolidation plans; they appear to solve your problem with lower repayments, however, your credit score will immediately drop, as it is a major red flag on your credit record. Furthermore, you’ll notice that everything will start costing you more; this may include the interest on your credit card, as well as your medical aid and car insurance premiums. Another thing you’d want to stay away from is loan modification, which is basically asking the bank or mortgage company to lower your repayments. This essentially prolongs and adds to your debt; rather pay off as much as you can as quickly as possible with the assistance of the bank. Using your credit card to make ends meet may be necessary but it's not recommended that you max it out if you’re already in financial trouble; although it provides a quicker solution by temporarily taking care of things, it shouldn’t be something that you become too reliant on.

Bulletproof Yourself As A Homeowner

You can avoid getting yourself into threatening situations and eliminate unnecessary debt by firstly buying a home that you can actually afford. It's important to remember that the bank will always qualify you for more than you can afford to pay back, however, it’s up to you to make the smart decision of buying within your means. If you’re married, try qualifying for a bond on just one of your incomes; that way, if either of you lose your job, your finances will be much more secure. If worse comes to worst, the best thing you can do is sell your home and start over by buying something you can afford. At the end of the day, you’ll still have a roof over your head and hopefully be debt-free without ruining your credit score.

De Lucia Group offers beneficial tips and solutions to assist homeowners with any challenges they may face with regard to homeownership.