Sometimes, life happens, and it can be hard to keep up with mortgage repayments. If you’re in that situation, don’t panic, because there might be a way to solve your problem.
Borrowers sometimes struggle to meet their mortgage repayments. The list of possible reasons is long, but some common ones include job loss, illness/injury and domestic violence.
There’s a misconception out there that if you miss a single mortgage payment, your lender will immediately seize your home and toss you out on the street.
The reality, though, is very, very different. Lenders have legal processes they must follow before they can foreclose on a mortgage. Also, lenders try to avoid foreclosing, for several reasons.
First, lenders are staffed by good, honest people who don’t like seeing other good, honest people get in trouble.
Second, lenders make their money from, well, lending money. So it’s in their interests to try to see the mortgage through to its conclusion, not to end it early.
Third, taking someone’s home and selling it off is a costly, time-consuming process, so it’s not something lenders want to do unless they have no choice.
Lenders often help borrowers who are in trouble
Are you struggling to pay your home loan right now?
Each lender has its own policies and each borrower’s situation is unique – but, as a general rule, lenders would rather work with borrowers to solve their problems than foreclose on them.
With that in mind, the sooner you tell your lender about your financial problem, the better. This is known as a ‘hardship notice’. Ideally, you should issue your hardship notice before you miss any mortgage repayments.
It’s important to be completely upfront with your lender. That means explaining:
- The extent of your financial problem,
- Why you’re experiencing this problem,
- How you might be able to solve the problem.
Your lender then has a legal obligation to assess your hardship notice and tell you either:
- That it’s willing to change your repayment terms – for example by temporarily stopping or temporarily reducing your repayments
- That it’s not willing to change your repayment terms – and explain why
Possible ways to improve your financial position
If you’re struggling to make your mortgage repayments, it might also be helpful to see if there are ways you can increase your income and reduce your expenses.
To increase your income, it might be possible to:
- Claim on unemployment, accident or sickness insurance
- Rent out a spare room in your home
- Sell a second car
- Get a second job
- Take extra shifts at work
To reduce your expenses, it might be possible to ask for ‘repayment holidays’ on your:
- Credit card debt
- Utility bills
- Hospital bills
- School fees
Free financial and legal advice
You might be experiencing enormous stress right now. If that’s the case, you might benefit from seeking free professional help.
You can call the National Debt Helpline on 1800 007 007, from 9:30am to 4:30pm, Monday to Friday. The NDH offers free financial counselling that might help you get back on track.
You might also need legal advice. Community legal centres offer free legal assistance, particularly for Australians who are disadvantaged and have special needs.