Your home loan is arguably your most important debt and asset. Staying on top of home loans repayments should be a priority, as normally one of your biggest monthly contributions; it is difficult to get back on top if you fall behind.
“Everyone finds themselves stretched financially at some stage. With holiday debt still around, school fees just paid and interest rates up you may find yourself with no breathing room and your biggest and most important debt, your home loan, is suddenly a big commitment,” says Patricia Temba, head of collections at FNB Housing Finance.
The very heart of the issue is that your income needs to exceed expenses. The only way in which to make this work is to increase your income or lower your expenses.
1. Be overly strict for a few months
Make the money you earn work for you by implementing strict measures to get back on top of your payments.
“Print out a bank statement and look at each expense leaving your bank account,” suggests Temba. “More than likely unnecessary expenses are coming off, whether it is pay TV, entertainment or even unnecessary banking fees, each rand saved will help. There is not much point in having Pay TV or ordering pizza in if you don’t have a home in which to enjoy these luxuries.”
It is important to note that this isn’t forever, just until you are back in a comfortable space.
2. Look at places to cut down
There are some necessary expenses that you can’t forgo. However, there are places to negotiate and cut down.
“Insurance is one place that is open to negotiation, spend some time gathering quotes and renegotiating your insurance contracts,” suggests Temba.
Another place to cut down is services such as cell phone bills.
“While having a cellphone is considered a necessary expense, racking up huge data costs to surf the internet or chatting for hours to friends is not necessary,” says Temba.
You can also look at your water and electricity bill consumption. Just by being more vigilant you can save on these expenses.
3. Temporarily reduce or push pause on other investments
You can push pause or temporarily reduce contributions to retirement annuities and other savings accounts.
“This is not a long term solution to solve your cash flow problems and certainly don’t be tempted to cash out as there are tax implications, but reducing your savings commitments for a few months may give you breathing space until you are back in a position to service your debts and continue investing and saving,” says Temba.
Make sure that as soon as you are in a position to, you reinstate all your investments and savings contributions.
4. Earn extra income
If you are really not getting on top of your expenses and you are exceeding your income consistently, you will need to look at other ways in which to earn extra income.
“Again this is not a long term solution, but can help relieve the immediate pressure until you are able to make your responsibilities again.
“Consider working overtime to earn a bit more income or another possibility is to cash in leave days, if you have the option,” says Temba.
Other ways to earning a bit more cash could be to rent out an extra room for a few months.
5. Don’t stop paying
“Don’t be tempted to miss or stop paying all together,” says Temba. “Even partial payments show good faith and interest will accumulate slower helping you to catch up.”
However, partial payment isn’t a long term solution. If you are really struggling speak to your bank. Admitting you need help as soon as you realise that you are heading into financial difficulty will go a long way to protecting your home.
“Your bank will make provisions for you to ensure that you keep your home. Repossession is the last resort and a bank will assist you in every possible way to ensure that this doesn’t happen,” says Temba
“There are a number of solutions that the bank can offer to help you if you are having financial difficulties, however it is up to you to also proactively take steps to help yourself out of the position you have found yourself in – in the first place,” concludes Temba.
Alan Straton
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