YOUR MONEY: What to do with rapidly rising bond repayments

Question:

The bond on my house has increased by R10,000 a month over the past year, making it unsustainable for me on my current income. I have an apartment I’m also paying off that’s rented out, but I pay levies and rates on it. Should I sell the flat to help cover my home loan? Or how should I pay my monthly house bond?

— Solange

Answer: 

In this situation, it’s advisable for the customer to contact her bank and to discuss if her home loan products are the correct type of products for her, based on her circumstances. It seems she has two traditional home loans.

There might be options to consolidate both properties into one account, for example, or into a structured loan account. She will have to apply for this and it will be subject to credit approval. The benefit will be that her interest rate will be reviewed, she will pay one instalment instead of two and her instalments may reduce. An amortising facility will also be beneficial for her. An amortising facility is one where the outstanding balance and available facility reduce each month until they get to 0 at the end of the term (this is how a loan normally works), as opposed to non-amortising, which is a facility where your available credit remains the same month to month (another example of this is a credit card). 

The other consideration is to also consolidate the insurance that she pays per property; she might get to pay a reduced premium (but she must not cancel any without proper financial advice).

A further suggestion is that she should use this opportunity to review her unsecured debts and consolidate as much as possible so that she can free up her cash flow.

If she must sell the apartment, she should take advantage of the bank’s assisted sales programme as it will have added benefits for her, if there is a shortfall.

Also, it is advisable that she keeps a good handle on where she spends her money to reduce unnecessary spending. Lastly, she must strive to keep up with her monthly repayments so that she keeps a healthy credit record.

— Tiffany Singh, FNB home and structured lending solutions collections head

Next week’s reader question:

Does the South African Revenue Service on occasion apply aggregation incorrectly when calculating lump sum tax? 

With regards to a severance lump sum benefit, it is not unusual to have received or withdrawn more than one lump sum.

In this case, individual taxes paid on a R500,000 and R1m lump sum were much more than tax on a single R1.5m lump sum. This is not the correct application of aggregation. It is likely that many taxpayers are unaware that their lump sum tax directive calculations were not correct. Comments? 

— Glen 

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