Debt Consolidation: Help Me Stop Drowning

[Ho3n3r]

I seriously need help now.

Basically, I have a home loan of R621k (Standard), and a personal loan of R74k (ABSA), which covered the deposit, and a bit more. The house price was R690k.

Now, before I started paying this, with the interest rate and the levy cost at the time, my salary was pretty much on the limit, I mean I knew I could afford it, and we have to knuckle down for 5 years, but it will get better with time.

However, then the interest went up twice in the last year, electricity went up quite a bit, and our levies went up R400 in the last 3 months, making my expendable income about R1.1k less than it was a year ago.

Thus, I went to Standard Bank and asked them if they could pay off the R61.7k remaining on the ABSA loan, and add it to my homeloan, as it would make business sense to them as well, as they would get more money from me in terms of interest, and I would pay less, and the only loser would be ABSA, which is really fine by me.

But, according to them, they can only up the bond's worth up to the original R621k, and pay out the amount that I've paid over to them in the last 15 months, which is about 12k after interest.

Surely there's another way, without re-paying bond registration etc.? How can I make this easier on both me and the wife? We seriously can't cut anywhere anymore - we don't even have DStv, never have, never will. Next things that will need to be cut, is insurance and medical aid, which is not ideal.

I really hope someone with experience in such a situation can give me something I can look at.

Thanks in advance.

 

[Mike Hoxbig]

Sell and buy lower? Probably not what you want to hear, but you shouldn't have bought a place that would have left you on the limit in the first place. Always make sure that you have enough disposable income left to be able to cater for unforeseen rising expenses, and even then still have a little breathing room left. This means that you can pump additional money into your bond (which you can access in emergencies if you have a revolving plan), however not have to stress in case things take a turn for the worse. Depending on your incomes, I would say look at buying about R100k lower, even if it means that it wouldn't be as nice as your current one.

 

[TheMightyQuinn]

Sell and buy lower? Probably not what you want to hear, but you shouldn't have bought a place that would have left you on the limit in the first place. Always make sure that you have enough disposable income left to be able to cater for unforeseen rising expenses, and even then still have a little breathing room left. This means that you can pump additional money into your bond (which you can access in emergencies if you have a revolving plan), however not have to stress in case things take a turn for the worse. Depending on your incomes, I would say look at buying about R100k lower, even if it means that it wouldn't be as nice as your current one.

This. We have a R7000 per month cushion that can absorb any interest rate and other changes. This goes into the bond as additional payment every month. If interest rates and municipal stuff goes up, we don't even feel it. And I'm not smug, we planned it this way, instead of buying a bigger more expensive house, that would leave us living on the edge every month.

 

[Pho3nix]

Just curious why you got a personal loan which knowing Absa is at 30% interest for the deposit? Why not knuckle down and save the bond installments for 8 months and pay cash

As for your problem, short of asking your boss for a raise, not much you can do unfortunetly.
You might be able to persuade Absa to increase your personal loan term to decrease the installments but yeah. Good luck mate.

 

[Pho3nix]

This. We have a R7000 per month cushion that can absorb any interest rate and other changes. This goes into the bond as additional payment every month. If interest rates and municipal stuff goes up, we don't even feel it. And I'm not smug, we planned it this way, instead of buying a bigger more expensive house, that would leave us living on the edge every month.

Life advice to buy just what you need, nothing more. Extend or move when you need a bigger place..

 

[Ho3n3r]

We already bought just what we need. I dunno if you know what places cost these days. And it's much better than renting.

Does anyone have any advice to do what my original question requested?

 

[Ho3n3r]

Just curious why you got a personal loan which knowing Absa is at 30% interest for the deposit? Why not knuckle down and save the bond installments for 8 months and pay cash

As for your problem, short of asking your boss for a raise, not much you can do unfortunetly.
You might be able to persuade Absa to increase your personal loan term to decrease the installments but yeah. Good luck mate.

Thanks, that's actually some interesting advice. The personal loan is at 21%, which apparently was not too bad for a personal loan, according to my research at the time.

Wish I could go cheaper, but for any less money the places we saw were absolute ****holes. Not just "not what we wanted".

 

[BloodBurner9000]

Sell and rent, or borrow from your parents, or moonlight. Get that personal loan out of the way. You guys, not having a deposit, clearly were not ready to buy.

Having something "much better than renting" is not the same as "just what we need". How is this better than renting?

 

[diggitydaz]

Speak to bank see if they can restructure your loan over a longer term to reduce monthly installments.

 

[Nerfherder]

We already bought just what we need. I dunno if you know what places cost these days. And it's much better than renting.

Does anyone have any advice to do what my original question requested?

In your case not.


Renting would have been better. Then you could have saved up a deposit while renting at a much lower rate.

You would have had a lot more breathing space.

These personal loans on a deposit are a scourge on humanity.

 

[Messugga]

You dun goofed son. There's nothing you can do short of refinancing which has additional costs so that doesn't help you. Sell, hope you get a good price. Alternatively, get a second job to kill the personal loan.

 

[Mike Hoxbig]

We already bought just what we need. I dunno if you know what places cost these days. And it's much better than renting.

Does anyone have any advice to do what my original question requested?

Do you have kids yet? If not then R690k is probably too much for just two people who are on the limit. Houses prices are not cheap, but then you need to be prepared to look at alternate areas, smaller places and/or do a bit of travelling.

Other than trying to increase your personal loan repayment term, there's not much that you can do. Even then, I doubt that it would make much of a difference given that your bond interest rate is in the region of 10% and your personal loan rate is 21%, which means that you're already losing a substantial sum of money each month - so the slightly additional monthly cashflow will be lost in any event and you're only going to delay your agony for a few more years. And when inflation hits next year then your additional cashflow will be gone too, and you'll be even worse off than you are now.

Rather be prepared to take some short term pain, sell, pay off your personal loan, buy/rent a cheap place and save up the proper way for a deposit for a better place. It's better than going through this for the next 10 years of your life.

 

[diggitydaz]

http://www.blog.standardbank.com/blog/2011/08/our-golden-rule-we-ll-do-all-we-can-keep-you-your-home

 

[akescpt]

I know you don't want to hear it but you might have to sell if you cant increase your income soon. im not sure if you are already in arrears with your bank. if you are, go the selling route before the bank steps in.

we really struggled as well in the beginning with the wife not having a permanent job. sometimes circumstances just change and you have to lump it. we got through it. to this day I have to ask my wife nicely to make me spaghetti mince since we used to eat so much of it during those dark days. she now refuses to make it.

we were always able to make payment. whatever credit facility we had access to was utilized. I remember an overdraft. if you in danger of losing the house then rather sell. rent. regroup and jump when you able to.

 

[Viper25]

Tough situation. I doubt the banks are going to help you any further.
The wife and you should look into moonlighting and kill off that personal loan as soon as possible.
Securing a deposit for a house by getting a personal loan is a huge no no.

 

[TJ99]

Surely the bank wouldn't have given you the loan if you didn't meet the affordability criteria (I think 30% of income after expenses)? You need to be making some pretty big bucks to get a loan for R621 000 these days... Probably a little under double that amount before tax, so about a million?

So what are you spending the other 70% on?

 

[Mike Hoxbig]

Surely the bank wouldn't have given you the loan if you didn't meet the affordability criteria (I think 30% of income after expenses)? You need to be making some pretty big bucks to get a loan for R621 000 these days...

So what are you spending the other 70% on?

I think the criteria is 30% of gross. They then assess your expenses. If you're not honest when listing your expenses, you're only screwing yourself...

 

[Pho3nix]

Surely the bank wouldn't have given you the loan if you didn't meet the affordability criteria (I think 30% of income after expenses)? You need to be making some pretty big bucks to get a loan for R621 000 these days... Probably a little under double that amount before tax, so about a million?

So what are you spending the other 70% on?

To buy a 700k house you need to earn a gross of around R22k.

 

[TJ99]

To buy a 700k house you need to earn a gross of around R22k.

Uh, That's a no...

That's what the banks' online calculator will tell you but they VASTLY overestimate. I earned quite a bit more than that a few years ago and it was a mission getting even a partial loan (R280k) for a flat. Friends have had similar stories.

 

[Ho3n3r]

Surely the bank wouldn't have given you the loan if you didn't meet the affordability criteria (I think 30% of income after expenses)? You need to be making some pretty big bucks to get a loan for R621 000 these days... Probably a little under double that amount before tax, so about a million?

So what are you spending the other 70% on?

Uhhh, your calculation is a bit off. And the calculation is about 30% of income BEFORE expenses and tax.