28 April 2021
How many payments can you miss before they repossess your home?
We explain the foreclosure process and give you tips to help you save your home from repossession.
What is home repossession?
If a borrower defaults in payment and money needs to be recovered by the credit provider, the credit provider is entitled to cancel prior agreements made on the house to recover the funds owed to them.
What is the process?
- The bank gets in touch with the debtor to discuss a default in the monthly bond payments and how to move forward.
- Several options are put forward (to the debtor) from selling the property, to catching up on payments, to debt counselling.
- Some banks offer assistance in selling the home on the open market which will bring in more money and protect the debtor from what could be long-term financial ruin should their house be repossessed.
- If there can be no solution the bank moves towards foreclosing (notice to move out as your bank is taking ownership of the house).
- A section 129 letter of demand is issued, this is the final step before the legal process begins. It informs the debtor that they are in arrears for a certain amount at a given date and a person is given ten days to respond to a section 129.
- If there is no solution, the bank’s legal team gets a summons from the High Court or magistrates (depending on the cost of the property).
- The summons is then delivered to the debtor by a sheriff of the court.
- A judgement order needs to be granted and obtained and the bank then applies for the right to auction off the property after which a judge determines that fair and legal processes have been followed.
- The money from the auctioned off property may cover the outstanding debts, loan amounts and costs. In most cases, it is not enough, as legal fees also need to be paid and the house is often sold at a loss, making the debtor liable for the shortfall.
How many missed payments before repossession?
The foreclosure process is (normally) initiated after three (or more) months of missed payments from the debtor. A letter of demand can be sent if a bond is more than 20 days in arrears.
Can a house be saved from repossession?
One of the biggest mistakes people make when they cannot make their bond payments is not contacting their bank to discuss a way to move forward. Instead, many choose to avoid their phones and emails, but it’s actually in the bank’s best interest to help you.
There are options available to you where the bank would prefer to help you settle your debt and keep your home.
Can a house be sold before repossession?
Yes, some banks offer assistance in selling a home on the open market bringing in more money and protecting the debtor from what could be long-term financial ruin should their home be repossessed.
Can you appeal a repossession order?
Yes. Your best plan of action is to apply for debt review and pay your bond under this arrangement. There are a few avenues to explore to appeal a repossession under Section 129.
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