MONEY CLINIC | I want to sell my house and buy a new one, but I'm in debt review

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Debt review is not a one size fits all solution and is a process that should be addressed by a duly registered debt counsellor.
Debt review is not a one size fits all solution and is a process that should be addressed by a duly registered debt counsellor.
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A Fin24 reader under debt review wants to sell his R1.5-million property, settle his debt, and put down a deposit for a new house, but no bank wants to consider his application.

He writes: 

I have a home loan with Bank X. I currently have an outstanding balance on my home loan of R360 000. Due to financial difficulty, I have applied for debt review independently. My credit score at the moment is 650.

I want to sell the property I currently own, valued at R1.5 million, pay off all my debt, and put down a deposit of at least R300 000 for a new house. However, none of the banks I have approached will not even consider my new loan application until I settle. I will settle as soon as I sell my house, but I can't even get pre-approval for a loan.

I have a stable income and can afford a place of R2 million. This will be the second property I buy. 

Neil Roets, founder and CEO of Debt Rescue, responds:

For a consumer to exit debt review, and to be able to apply for new credit, all existing short-term debt (this includes vehicles, but excludes home loans) has to be paid in full, and home loans must be up to date. In this specific case, the property can be sold, and any funds remaining after settling the bond can be applied to settle all the short-term debt. Once all the short-term debt is settled, a clearance certificate will be issued and the consumer will no longer be under debt review. The consumer will then be able to apply for new credit. New credit being granted after the clearance certificate is issued, will be based on various factors, including (but not limited to) affordability and credit score.

Any new application for credit, including a pre-approved loan, will only be possible once the clearance certificate has been issued. 

Questions may be edited for brevity and clarity.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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