How to handle the bond on your property

Julie Brownlee, Fsp Invest, 07 May. 2015

Tags: bond, property, bond repayments, positive equity, negative equity, managing your bond,



When you buy a property chances are you’ll take on a huge amount of debt to achieve it by getting a bond from the bank.

You should never forget that your home is security for this loan. This means if you can’t keep up repayments, your home is at risk.

So how should you handle your finances when it comes to your bond?

Read on to find out…



What if you’re struggling to pay your bond?


If your financial situation changes, you need to address it as soon as possible. For example, if you lose your job, you need to make a contingency plan until you get a new job.

Speak to your bank about your bond immediately. You’ll find them more willing to help if you tell them early on rather than waiting until you can’t meet your bond repayments.

You might be able to arrange a repayment holiday for a short period of time. Or you may be able to refinance your property over a longer term to make the repayments more affordable.


What if the property market slumps?


If the property market slumps and you recently bought your home, there’s a chance of negative equity. This means the amount you borrowed to buy the property is greater than its value.

Unless you sell your property this doesn’t make a difference to you as long as you can keep up with repayments.

If you have to sell your property, it means you’ll still have money due on the bond. So it’s in your best interest to keep the property until the market recovers and the bank’s.


What if you have positive equity in your property?


Positive equity is when the value of your home exceeds what you owe on your bond. This means if you decided to sell, you could pay off the bond.

If you decide to move and have a lot of positive equity, it’s a good idea to keep at least 25% of positive equity in your home as a contingency plan in case something unexpected happens.

So there you have it, how to handle the bond on your property.

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