Debt Consolidation: Help Me Stop Drowning

[Ho3n3r]

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...

Listed everything as honestly as it was physically possible. No other way to do it.

 

[Sapcat]

Firstly, sorry to hear about your situation. An important lesson is to not let debt get out of control - so unless you find a second income, I would recommend renting till you in a financial position to commit to a bond. Swallow your pride, ensure a roof over your families head and get rid of the personal loan ASAP.

Save, Save, Save and reassess your situation in 3 years.

Good luck

 

[Pho3nix]

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.

:erm: you're kidding right?
Know they over-estimate by 15% off usually but how did you not get a partial loan for R280k? If you don't mind me asking, how was your credit?

 

[TJ99]

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

My bad, I thought you were with a reputable bank. Both Standard and FNB grilled me extensively about my expenses when I wanted to buy a place.

Anyways, it seems the others may have a point, you might need to sell. Although you should probably go and see a professional, we on the forums are not certified financial advisors.

 

[TJ99]

:erm: you're kidding right?
Know they over-estimate by 15% off usually but how did you not get a partial loan for R280k? If you don't mind me asking, how was your credit?

I did get the loan, it was just a mission.

I'd assume excellent since I've never missed a payment on anything. Although I never really used credit much, I prefer to save and buy things cash. Or live without it.

 

[SauRoNZA]

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?

The thing is that 30% is hardly affordable and as he stated in the OP he got screwed firstly by making bad debt in the form of the personal loan and secondly the interest rate climbing up twice.

Real affordability in my opinion is 20% of Nett household income. Anything more than that and you are running yourself into a world of pain.

You also want to buy for less than you can afford so that you can boost the payment and there by pay it off more quickly. If you are simply paying back the bank over 20 years (and no 30 years is not an option) then you might as well have rented because you'll barely break even at the end of the day.

 

[TJ99]

The thing is that 30% is hardly affordable and as he stated in the OP he got screwed firstly by making bad debt in the form of the personal loan and secondly the interest rate climbing up twice.

Real affordability in my opinion is 20% of Nett household income. Anything more than that and you are running yourself into a world of pain.

I agree, 30% of gross is usually not affordable at all, if that's what they use. Just that my bank didn't calculate it like that.

 

[SauRoNZA]

I agree, 30% of gross is usually not affordable at all, if that's what they use. Just that my bank didn't calculate it like that.

Yeah look that's the legal limit I believe but generally the banks aren't even stupid enough to go quite there.

People do justify their affordability with incredible ways and means and the banks don't dig too deep to confirm...they only want to cover their own arse after all.

We planned very well buying our own house and had none of the 5 years starter blues because of it. In fact it will be paid off in <10 years of the loan term.

 

[JackWhite]

The 30% of gross rule applies to very few. In your case it seems 20%-30% of net would have been more appropriate. Sell up and rent. Not easy but has to be done to move forward

 

[F40]

I would not sell the house. It is way too expensive in terms of transactional costs and will put you back further in the long run. It will have a long term detrimental effect for something needing a short/medium term solution. I would moonlight and work day and night and weekends for a year or however long to clear the PL. Your other option is to rent your current house out provided you can at least break even (based on prime going up another 200 bps from here) and then rent a cheaper place to stay in for the time being.

 

[^^vampire^^]

Am I the only one who realises that it is cheaper to own than to rent, especially if you put a 10% deposit down?

My place cost R619k, bond payment is R4800 with the 10% deposit, levies rates, taxes brings that to R6000 per month which is what I charge my tenant and I could easily get R7000 per month for it. Gone are the days when renting was worthwhile. Renting nowadays is just as good to lead you to a life of debt (or owning nothing) as you probably won't be able to save any money for a deposit on a place.

OP: the best solution is to go talk to the bank about extending the payment period. The bank would rather make sure they get their money sometime rather than never and it's generally more in your favour if you actively show that you have taken steps to resolve the situation rather than get to a point of non payment.

 

[Ho3n3r]

Am I the only one who realises that it is cheaper to own than to rent, especially if you put a 10% deposit down?

My place cost R619k, bond payment is R4800 with the 10% deposit, levies rates, taxes brings that to R6000 per month which is what I charge my tenant and I could easily get R7000 per month for it. Gone are the days when renting was worthwhile. Renting nowadays is just as good to lead you to a life of debt (or owning nothing) as you probably won't be able to save any money for a deposit on a place.

OP: the best solution is to go talk to the bank about extending the payment period. The bank would rather make sure they get their money sometime rather than never and it's generally more in your favour if you actively show that you have taken steps to resolve the situation rather than get to a point of non payment.

Thanks man. I did realise that as well, and that's why I bought. Renting is just throwing money in the water, as opposed to a house, which is an investment. Looks like we're the only 2 in this thread that realises it. And renting wouldn't have been that much cheaper, so I would almost be in the same situation.

It is already over 30 years though.

I just don't understand why the bank can't extend my loan by about 50k and make more money out of it, whilst totally resolving my situation. Last night I made some more calculations, and turns out I would actually be saving about R1.5k by being allowed to do this.

So I don't get why I should **** myself by selling and renting again, which would be a much worse situation long-term, just to resolve my short term woes, which could just as easily be resolved by the bank just actually trying to help me a bit better.

Anyhow, I have an appointment with the bank today, and I am determined to make them listen to me. I cannot accept that they are just flat out saying no to more money. It doesn't make business sense.

Thanks vampire.

 

[MartyMarts]

Personally I wouldn't sell unless there's a guaranteed chance you'd get a very good price. Moving out and renting cheaper while renting your place out is an option but again, the rent you charge and the rent you will be paying need to work out in your favour.

Another option I'd look at (but in your case it seems dead in the water already) is to try and extend the bond or even, try increase the bond to absorb the other 74k.

Alternatively you and/or your missus need to somehow make extra money. Much easier said than done. It's a sh*tty situation to be in. Good luck dude.

 

[Mike Hoxbig]

You don't have to rent, but you can buy cheaper. Extending your bond would mean registering a new bond, and that means additional bond registration fees. You may as well then buy cheaper.

 

[MartyMarts]

You don't have to rent, but you can buy cheaper. Extending your bond would mean registering a new bond, and that means additional bond registration fees. You may as well then buy cheaper.

True.

EDIT: Personally I see buying/selling as huge schlep so would rather avoid it if possible. Haven't bought/sold in a few years - maybe the process is easier these days.

 

[Ho3n3r]

Personally I wouldn't sell unless there's a guaranteed chance you'd get a very good price. Moving out and renting cheaper while renting your place out is an option but again, the rent you charge and the rent you will be paying need to work out in your favour.

Another option I'd look at (but in your case it seems dead in the water already) is to try and extend the bond or even, try increase the bond to absorb the other 74k.

Alternatively you and/or your missus need to somehow make extra money. Much easier said than done. It's a sh*tty situation to be in. Good luck dude.

Thanks Marty. I am going to the bank at 12 today, and I'm really in the mood to convince them to extend the bond - I was there on Saturday, and the lady spoke to them, sounds like there MIGHT be another way, but I'll discuss that today and find out exactly what the permutations are.

My wife had a job for a while, but the company closed down, and she hasn't been able to find a job since.

My current job mostly requires me to work up to 14 hours most days, so getting an extra job would really melt me.

 

[MartyMarts]

Thanks Marty. I am going to the bank at 12 today, and I'm really in the mood to convince them to extend the bond - I was there on Saturday, and the lady spoke to them, sounds like there MIGHT be another way, but I'll discuss that today and find out exactly what the permutations are.

Good luck, man!

My wife had a job for a while, but the company closed down, and she hasn't been able to find a job since.

My current job mostly requires me to work up to 14 hours most days, so getting an extra job would really melt me.

raises another issue. When applying for a bond and doing the affordability exercise, it's one thing building in a buffer and/or going for something cheaper than you can afford at the time but sometimes life happens or rather sh*t happens and you just have to roll with the punches. One can't always foresee what will happen to them financially over the next few decades.

 

[Ho3n3r]

Good luck, man!



raises another issue. When applying for a bond and doing the affordability exercise, it's one thing building in a buffer and/or going for something cheaper than you can afford at the time but sometimes life happens or rather sh*t happens and you just have to roll with the punches. One can't always foresee what will happen to them financially over the next few decades.

Appreciated.

And we built up the funds for registration etc. on her salary, and a part of the deposit as well.

Registration process started mid-June, lost her job mid-july, moved in 1st of Ausust. But at the time, we though she could just get another job, and without it we'll still survive, which at the time was true.

But as you say, life happens. Still, if the bank can help me, the problem goes away. And it's not like we live in our dream place, at that time we could barely find anything cheaper. We found one place that was actually 20k cheaper, but then we would have had to repair the entire ceiling ourselves because it was geyser burst-damaged, and most of it collapsed, and who knows what other damage it would have caused. And it was too far away from the wife's job at the time, for me distance is no problem to drive, but I don't want her to drive too long distances, which increases her chances of being smashed and grabbed/hijacked. Of course, if we knew she was gonna lose her job, we could have looked closer to my office.

 

[MartyMarts]

Appreciated.

And we built up the funds for registration etc. on her salary, and a part of the deposit as well.

Registration process started mid-June, lost her job mid-july, moved in 1st of Ausust. But at the time, we though she could just get another job, and without it we'll still survive, which at the time was true.

But as you say, life happens. Still, if the bank can help me, the problem goes away. And it's not like we live in our dream place, at that time we could barely find anything cheaper. We found one place that was actually 20k cheaper, but then we would have had to repair the entire ceiling ourselves because it was geyser burst-damaged, and most of it collapsed, and who knows what other damage it would have caused. And it was too far away from the wife's job at the time, for me distance is no problem to drive, but I don't want her to drive too long distances, which increases her chances of being smashed and grabbed/hijacked. Of course, if we knew she was gonna lose her job, we could have looked closer to my office.

Cool Let us know how it goes later today?

 

[Maverick Jester]

I just don't understand why the bank can't extend my loan by about 50k and make more money out of it, whilst totally resolving my situation. Last night I made some more calculations, and turns out I would actually be saving about R1.5k by being allowed to do this.

Property value, in the event that you default and they need to sell the property.