Struggling to cover your monthly bond repayments and tempted to sell? Here are your options

Interest rates may have been muted for the majority of 2021, but 2022 has given rise to some of the biggest hikes of recent years. 

The current interest rate of 9.75% is expected to increase by a further 25 basis points before the end of 2022.

A 1.25% hike may seem insignificant to some wealthy homeowners, but for many South Africans the impact of this increase on home loan repayments has been especially challenging. There is a delicate balance between affordability, income and interest rates; and quite often, small changes can make a big difference.

While selling a home is often the last resort for cash-strapped homeowners, some may now find themselves struggling to cover their monthly repayments and looking to cut their losses.

Selling your home might seem like the most obvious route to an easy payday, but you must first do the math to make sure that it pays off. Timing is important - if your neighbourhood currently has an excess of similarly-priced homes on the market - you might find it difficult to secure a buyer.

Will I make a profit on my home?

First and foremost, those who put down a deposit and worked to pay down their bond over the years will have a higher chance of turning a profit.

The some simple math should be done to deduce whether the time is right to sell your home. Important to note is that this equation doesn't take into account the market value of the property or inflation.

One needs to weigh up the purchase price of the property vs the expenses incurred during the time of property ownership.

Expenses such as transfer duties and conveyancing fees (at the time of purchase), bond costs, rates and taxes, interest paid on the home loan over the load period, home renovations, repairs, levies, special levies and additional security should all be factored in. Also bear in mind that you will need to account for the agent's commission which is generally anywhere between 3 and 5% of the sale.

If you rented out the property, then you can offset these expenses against the rental income received. If the property is your home, then you would need to consider what you would have paid in rental fees over this period. For instance, if you had spent R15 000 on rent over a five-year period then you would offset R900 000.

The final figure is known as the break-even value. This is the price that you need to sell your home at in order to break even. Anything over and above is profit.

If the loss is still too great...

If, after your calculations, you are still far from breaking even, you should consider one of the following alternative avenues:

1.    Rent out your property and consider in a more affordable residence if this is a workable option until the bond has been paid down and the market is on the up.

2.    If you have extra accommodation on your property such as a cottage, converted garage, or flatlet, spruce these up and rent them out for extra income.

3.    Cut back on unnecessary expenditures to ensure that you can repay your bond each month. "Making the effort to budget and cut out certain luxuries should always be your first step when struggling with affordability - you might be in a more stable financial situation than you'd originally thought.

4.    In a case where you find that you regularly have some extra cash left over at the end of the month, it's strongly advised that you increase your monthly home loan repayment so that you can pay off your bond quicker. "Property is a great investment, but you lose money if you're forced to sell so consider the previously listed options before selling as a last resort.

Finally, for those wondering whether now is a good time to invest in property, buyers can still take advantage of an extended buyers' market. Now is a good time to negotiate a good deal on a home in a sought-after area but keep in mind the 'real cost of ownership' when doing the math.