Refinancing your home bond to cope with the lockdown period, and after: is it a good idea?

More and more people are beginning to realize that the Coronavirus lockdown is wreaking havoc in the SA economy and that they may soon be, or already are seriously affected financially. Rowan Alexander, Director of the Cape Town estate agency, Alexander Swart Property, is increasingly asked by homeowners whether or not they should apply to refinance their home mortgages, e.g. by extending the payment period on their current bonds, applying for a second bond or "payment holiday", or converting to an access bond?

"The reasons for this can vary from outright redundancy to a simple, hopefully temporary, drop in earnings but in general many home owners seem to be looking for a breathing space, bridging finance or lower or no payments for a few months. While this may seem a good idea right now, those contemplating doing so should make quite sure that they understand the consequences and have a plan in place. The banks are doing what they can to bring relief to those who need it but, as many financial advisers have been quoted, there is seldom any free lunch: relief given now, in the form of payment holidays or reduced monthly payments, will probably be factored into extended payback periods and interest on the sums involved. It is, therefore, essential to examine the terms and conditions of the new agreements carefully.

"Granted that some HAVE TO find a way out, the basic principle of "Be ready to suffer rather than increase your debt" - a message which millenials and subsequent generations find very hard to accept remains wholly valid. It concerns me that some appear to be jumping at the opportunity of reducing bond payments for a time, without considering the full implications and without any assurance that their current problems will ease off in the not too distant future, if and when movement and social contact become less restricted. A significant turnaround in the current situation may well not be seen in less than 12 months."

Alexander Swart recognise that refinancing, if only for six months or a year, may be essential in the current situation. They are offering free home valuations, said Alexander, to give applicants the data with which to approach ASP's in-house bond originator or other sources of finance. Those wanting more information on this should contact Rowan Alexander on 082 581 3116 or by email : rowan@asproperty.co.za