For most South African homeowners, the bond is their single largest monthly expense and their property is their most valuable asset. If you are struggling with debt and considering debt review, your first question is almost certainly: what happens to my home loan? The short answer is that your home loan is included in debt review, your monthly instalment is reduced, and your home is legally protected from repossession. This guide explains exactly how it works.
Key point: Your home loan (mortgage or bond) is a credit agreement under the National Credit Act and is included in your debt review restructured repayment plan. The court order that accompanies debt review protects your home from repossession. Your home loan instalment is reduced to fit your affordability, and the bank cannot foreclose while you are complying with the restructured plan.
How Does Debt Review Affect Your Home Loan?
When you apply for debt review, your debt counsellor gathers a full list of all your credit agreements. Your home loan is one of them. Under the National Credit Act (Act 34 of 2005), a home loan — whether it is called a mortgage, a bond, or a housing loan — is a credit agreement. It does not matter which bank holds the bond, whether it is ABSA, Standard Bank, FNB, Nedbank, or Capitec. The home loan is included in the debt review process just like any other credit agreement.
Your debt counsellor then prepares a restructured repayment plan (filed as a Form 17.2) that covers all your debts, including the home loan. This plan is submitted to the magistrate's court for approval. Once the court grants the order, every creditor — including the bank that holds your bond — is legally bound by the restructured payment terms.
How Your Home Loan Is Restructured
The restructuring of your home loan during debt review typically involves several adjustments. Your debt counsellor negotiates with the bank on your behalf to make the monthly instalment affordable within your budget. Here is what changes:
- Interest rate reduction: The bank may agree to reduce the interest rate on your home loan for the duration of the debt review. This is one of the most significant savings, as even a small rate reduction on a large bond balance substantially lowers your monthly payment.
- Extended repayment term: The repayment period may be extended beyond the original term to further reduce the monthly instalment. For example, if you had 15 years remaining on your bond, it could be extended to 20 or 25 years.
- Reduced monthly instalment: The combination of a lower interest rate and longer term results in a significantly reduced monthly payment that fits within your affordability assessment.
- Arrears incorporated: If you have fallen behind on your bond payments, the outstanding arrears are worked into the restructured plan rather than requiring immediate catch-up.
- Bond remains registered: The bond stays registered against your property. Ownership does not change. You continue to live in your home and the bank retains its security over the property.
It is important to understand that your home loan is often the largest debt in the restructured plan. Because of this, your debt counsellor gives it priority in the affordability calculation. The home loan instalment is typically set first, and the remaining disposable income is allocated to other creditors.
Section 86(7)(c)(ii) — The Court Order That Protects Your Home
The legal foundation of your home's protection during debt review is the magistrate's court order granted under Section 86(7)(c)(ii) of the National Credit Act. When the court approves your debt counsellor's restructured repayment plan, it issues an order that:
- Declares you over-indebted and in need of debt restructuring
- Approves the restructured repayment plan as proposed by your debt counsellor
- Prevents any creditor from enforcing, executing, or repossessing any asset while the order is in force
- Binds all credit providers listed in the plan to accept the restructured payment amounts
This court order is the reason why the bank cannot foreclose on your home or attach your property while you are under debt review. The order remains in force for as long as you are complying with the restructured payment plan. It is a legally enforceable order of the court, and any creditor that attempts to bypass it would be acting in contempt of court.
Warning: The court order protection only applies while you are making the agreed payments under the restructured plan. If you stop paying, the bank can apply to court to have the debt review order set aside, after which they may proceed with foreclosure. This is why it is critical to maintain your payments throughout the debt review process.
Can the Bank Foreclose on Your House While Under Debt Review?
No. While the Section 86(7)(c)(ii) court order is in force, the bank cannot foreclose on your property, obtain a sale in execution order, or sell your home at auction. The court order creates a legal shield around all your assets — including your home — for the duration of the debt review.
The bank would need to first apply to court to have the debt review order rescinded or set aside. Courts are generally reluctant to do this if the consumer is making payments in terms of the restructured plan. South African courts, following the Constitutional Court's ruling in Jaftha v Schoeman, treat the loss of a person's home as a measure of last resort that must be proportionate to the debt owed.
In practical terms, the bank benefits from the restructured payments because they continue to receive money on the loan. A foreclosure and auction often results in the property selling for well below market value, which is not in the bank's interest either. For this reason, banks generally cooperate with the debt review process.
What About a Second Bond or Access Bond?
If you have a second bond or an access bond facility on your property, these are also credit agreements under the NCA and are included in the debt review. Your debt counsellor will list them separately in the restructured repayment plan. The access bond facility will be frozen — you will not be able to draw further funds from it during debt review, as this would constitute taking on new credit, which is prohibited under Section 88(1).
The outstanding balance on any second bond or access bond is restructured in the same way as the primary home loan: with a potentially reduced interest rate and extended term to lower the monthly payment.
Can You Sell Your House While Under Debt Review?
Yes, you can sell your house while under debt review. There is no legal prohibition against selling your property. However, there are important rules to follow:
- The proceeds from the sale must first be used to settle the outstanding bond in full, including any early termination fees or penalties
- The conveyancing attorney will pay the bond directly from the sale proceeds before any funds are released to you
- Any surplus after the bond, transfer costs, agent commission, and other sale expenses have been paid belongs to you
- You must inform your debt counsellor before listing the property, as the sale affects the restructured repayment plan and the court order may need to be amended
- If the sale proceeds are not enough to cover the bond, the shortfall remains a debt and stays in the debt review plan
Selling your home while under debt review can be a strategic decision — for example, if you are downsizing to reduce expenses or relocating for work. Your debt counsellor can advise on how a sale would affect your overall debt review plan.
Can You Get a New Home Loan While Under Debt Review?
No. Section 88(1) of the National Credit Act explicitly prohibits any credit provider from entering into a new credit agreement with a consumer who is under debt review. This means you cannot:
- Apply for a new home loan or mortgage
- Switch your bond to a different bank
- Transfer your bond to another property
- Take out a further advance on your existing bond
- Apply for any other form of credit (vehicle finance, personal loan, credit card, store account)
This restriction remains in place until you receive your debt review clearance certificate and the debt review flag is removed from your credit profile. Switching banks or transferring your bond would require a new credit agreement, which is not permitted during debt review.
Your Home Loan: In Debt Review vs Outside Debt Review
The table below summarises the key differences between how your home loan is handled inside and outside debt review:
| Aspect | In Debt Review | Outside Debt Review |
|---|---|---|
| Interest rate | May be reduced through negotiation | Standard rate as per your loan agreement |
| Monthly instalment | Reduced to fit your affordability | Fixed as per original agreement |
| Repayment term | May be extended to lower payments | As per original agreement |
| Foreclosure risk | Protected by court order while complying | Bank can foreclose after Section 129 notice and court order |
| Arrears | Incorporated into restructured plan | Must be caught up or face legal action |
| New credit | Prohibited under Section 88(1) | Subject to affordability assessment |
| Sell property | Yes — proceeds settle bond first | Yes — proceeds settle bond first |
| Switch banks | Not permitted (new credit agreement) | Permitted through bond switching |
| Access bond draws | Frozen — no new credit allowed | Available subject to facility limit |
| Bond registered against property | Yes — unchanged | Yes — unchanged |
Practical Considerations for Homeowners in Debt Review
While debt review restructures your home loan and protects your property, there are several practical matters that homeowners need to be aware of:
Municipal rates, body corporate levies, and homeowners association fees are NOT credit agreements under the NCA. They are not included in debt review. You must continue paying these from your essential expenses budget. Failure to pay can result in the municipality placing a lien on your property.
Your homeowner's insurance (building insurance) is a requirement of your bond agreement. It must continue to be paid. Your debt counsellor will include it as an essential expense. If your policy lapses, the bank may take out insurance on your behalf at a much higher cost.
You remain responsible for maintaining your property. While your budget will be tighter during debt review, it is important to address critical repairs to maintain the property's value. Discuss any major repair needs with your debt counsellor.
The market value of your property may increase or decrease during debt review. This does not affect your debt review payments — they are based on the outstanding loan balance, not the property's market value. However, increasing property value strengthens your financial position.
After Your Clearance Certificate: What Changes for Your Home Loan?
When you have settled all your debts except your home loan, your debt counsellor issues a clearance certificate under Section 71(1)(b) of the National Credit Act. This is the most common way that homeowners exit debt review, because the home loan typically has the longest repayment term and is the last debt standing.
Once the clearance certificate is issued, several things change:
- The debt review flag is removed from your credit profile at all four credit bureaus
- You continue paying your home loan at the restructured interest rate — this does not revert to the original rate
- You are free to apply for new credit, including vehicle finance, personal loans, and credit cards
- You can refinance your home loan or switch banks if you find a better deal
- You can apply for a further advance on your bond if you need access to equity in your property
- Your credit score begins to recover as the debt review flag is removed and your payment history starts rebuilding
Many people who have been through debt review find that their home loan is actually in a better position than before — the reduced interest rate has allowed more of each payment to go toward the capital balance, and they have built strong payment discipline throughout the process.
Debt review does not take your home away — it protects it. Your bond is restructured to be affordable, the court order shields your property from repossession, and you continue to live in and own your home throughout the process. For most homeowners, debt review is the safest path to getting finances back on track without losing their most valuable asset.
Related Articles
A detailed look at how the NCA protects your home from foreclosure and sale in execution during debt review.
A complete guide to debt review in South Africa — how it works, who qualifies, and what to expect from the process.
What the clearance certificate is, when you get it, and how it restores your financial freedom after debt review.
Frequently Asked Questions
Is my home loan automatically included in debt review?
Yes. Your home loan (mortgage or bond) is a credit agreement under the National Credit Act and is automatically included in your debt review. Your debt counsellor will list it alongside all your other credit agreements when filing the Form 17.2 restructured repayment plan with the court.
Can my bank foreclose on my house while I am under debt review?
No. Once the magistrate grants the Section 86(7)(c)(ii) court order, your home is legally protected from repossession. The bank cannot foreclose or sell your property at auction while you are under debt review and making the agreed payments under the restructured plan.
Can I sell my house while under debt review?
Yes, you can sell your house while under debt review. The proceeds from the sale must first be used to settle the outstanding bond. Any surplus after the bond and sale costs have been paid belongs to you. You must inform your debt counsellor before proceeding with the sale, as it affects your restructured repayment plan.
Can I apply for a new home loan while under debt review?
No. Section 88(1) of the National Credit Act prohibits you from entering into any new credit agreement while under debt review. This includes home loans, vehicle finance, personal loans, and credit cards. You must first complete debt review and obtain your clearance certificate before you can apply for new credit.
What happens to my home loan after I receive my clearance certificate?
If all debts except your home loan have been settled, your debt counsellor issues the clearance certificate under Section 71(1)(b). The debt review flag is removed from your credit profile and you continue paying your home loan independently at the restructured interest rate. You are also free to refinance your bond or apply for new credit.
