Are You Falling Behind on Mortgage Payments? What You Can Do
Life can throw a curve at you and push you beyond your means. If something that creates a strain on your finances happens, and you cannot afford to make your mortgage payments, don’t hide it. Act fast!
The sooner you take action, the better the chances of avoiding a mortgagee sale.
If you fail to make your mortgage payments, here’s what you must do.
Don’t Hide Your Head in the Sand Take Action
Mortgagee sales in strong markets such as Auckland can happen because people find themselves in a difficult financial position.
For many people in New Zealand, inability to make mortgage payments is a major strife. Many who fall into financial hardship can sometimes try to hide it. But like many fast-spreading issues, silence will worsen the situation.
Don’t hide your head in the sand. Take action, get advice and inform your lawyer, financial advisor, and the lender. According to the Banking Ombudsman Scheme, the sooner you alert the lender, the better your chances of averting a mortgagee sale.
If you come forth early, at least before you miss an installment, the lender is usually obliged to consider your circumstances and could negotiate a workable solution.
Re-read the Mortgage Documents
As you prepare for a meeting with the lender’s rep or a mortgage broker, take some time to fish out the mortgage documents and read them again. This time read them with a discerning eye.
Pay close attention to the ‘failed payments’ section. It contains details of what action the lender will take if you miss payments in line with the contract as well as what steps the lender will take before resorting to a mortgagee sale.
As the adage goes, to be forewarned is to be forearmed. So, arm yourself with this knowledge first.
Know Mortgagee Sale Owners Rights
As you interact with the terms of the contract, and financial advisors, learn more about your rights as the owner. Mortgagee sale homeowners also have rights. But, this is not an acceptable excuse for failing or delaying to contact the lender.
Under the Credit Contracts and Consumer Finance Act, you can present your situation to the lender and request a change in the terms of the contract.
Some of the options the lender may offer are:
- Changing the frequency of payments e.g. from weekly to monthly;
- Extending the term of the home loan e.g. from 15 years to 20 years. This effectively lowers your payments;
- Changing the structure of the loan. The lender may change the structure such you pay interest only (which is lower) for a predetermined period.
- A mortgage holiday.
It’s important to note the following:
- Lenders typically give breaks where the financial difficulty is triggered by a genuine misfortune. It could be a job loss, relationship break-up, or death.
- The offer for a break is probably only on the table as long as you’re not behind on your mortgage repayments. So, act fast!
- Whereas such breaks will give you temporary relief, you will end up owing more in the long run.
Reach Out and Learn More About Mortgage Rescue Packages
If you’ve fallen behind on several payments, chances are the lender has already sent (or is considering sending) you a demand for payment and is preparing for the prospect of a mortgagee sale. This is the first of formal steps towards the forceful recovery of the loan. If you are still unable to pay, the lender will issue a PLA Notice which sets you up for a mortgagee sale.
If you’ve received a PLA Notice, it is generally advisable that you seek legal counsel from a qualified professional like a lawyer.
Reach out to a mortgage broker and develop a mortgage rescue plan for your home.