Mortgage Stress is Looming; Can You Handle It?

The last review of the OCR by the Reserve Bank saw the regulator drop the rate by 0.5 points. Subsequently, lenders revised rates downwards to reflect the RB move. One can say that “Kiwis are laughing all the way to the bank”. Borrowers are enjoying better loan terms and bigger loans. This is reflected in the borrowing trends, especially of home loans. The average loan values have been rising and riskier (low deposit) mortgages  more common. On the other hand, credit card debt has ballooned.

With a higher debt to income ratio, New Zealand homeowners are at a higher risk of mortgage stress than ever before.

If you are already stretched to the limit with mortgage payments, mortgage stress could be looming. But are you prepared for it?

Read on and learn how you can handle it.

 

Build a savings reserve

Building a savings reserve may sound ironic right now but that’s exactly what you ought to do.

 

It’s time you took advice from one of the most successful investors in history – Warren Buffet. Spend what you have after saving.

You may have to be more realistic and check your spending.

Are you spending on what you need? Or are you trying to keep up with the Kardashians?

Reach out to a financial advisor or debt counselor and work out ways to cut your expenditure so that you can save. The more you have in your savings, the higher your chances of surviving a rate hike without being scathed.

 

Change the Mortgage Structure

If you are already experiencing mortgage stress, and your budget is stretched to the limit, you may need to review the mortgage structure.

Perhaps you had the ambition to finish paying off your mortgage in less than 15 years. So you took up a shorter-term mortgage. Or maybe your income has dipped, perhaps due to the loss of a partner through death or divorce, or due to a job shift.

Whatever the case, a review of the mortgage structure and terms can go a long way in relieving mortgage stress.

You can talk to the lender and discuss your options before you miss any payments.

 

In your discussions, consider stretching the loan term and reducing the installment payments. You’ll pay more interest in the long run, however, your credit integrity will be intact. This is what will help you live to fight another day.

 

Reach out to a bad credit mortgage broker

For many people, mortgage stress is often accompanied by denial.

When you fail to appreciate that you are unable to make mortgage payments and bury your head, you become vulnerable to a mortgagee sale.

 

If you’ve missed a few mortgage payments, it’s undeniable that you are experiencing mortgage stress. Unfortunately, the lender bank may not be as considerate as you expect and they may serve you with a PLA Notice. If that’s your case, reach out to a bad credit mortgage broker and explore your options of refinancing with alternative lenders.

 

It may seem like a more expensive option at first. But, it gives you room to breathe.

You can sell the home and downgrade to a more affordable home, or you can get much-needed time to get back on your financial feet.

 

Don’t let mortgage stress push you to a mortgagee sale. Reach out to a lawyer or a trusted mortgage broker and have them help you through these options.

Tips to Help You Buy Time When Facing a Mortgagee Sale

When you use a mortgage to buy a home, the lender retains charge over the title until after you have paid off the entire loan according to the contract. If you fail to make payments, the lender has the right to repossess and sell to recover the debt. When a lender takes debt recovery steps, it is could end in a mortgagee sale.

But the lender must do it according to the law.

Although the process of a mortgagee sale may not be quick, a couple of weeks or months could feel like a few moments, especially when you are trying to save your home.

Fortunately, you are not helpless. You can buy time and avert a mortgagee sale.

Here are a few tips to help you.

 

Reach out to the lender

Don’t bury your head in the sand or assume that the lender will not do anything.

It might not be the easiest thing in the book, but you can face your adversary straight. It may feel embarrassing and you may not want to go through all that, but as Mark Twain puts it, eat the frog first. The other tips will feel a lot easier.

When you reach out to the lender, be ready to explain your situation and propose a repayment plan. The lender can accept or reject your proposal, or they can counter it.

It’s advisable to have an experienced mortgage broker by your side to help in the negotiation.

 

Pay the outstanding amount

The lender will demand full payment of all outstanding amounts. If you have already received a letter of demand or a PLA Notice, you will see this request appear conspicuously on the letter or notification.

Unless the lender has decided to recover the entire loan secured by the mortgage (after non-payment and expiry of a PLA Notice), they are most interested in receiving payment of only what’s outstanding. This could be a couple of missed installments, interests and penalties.

If you have a means of paying off the outstanding amount immediately, do so. You could sell off an asset, like a car, or stocks you hold and use the cash to repay the outstanding amount on the mortgage.

This will buy you much-needed time as you’ll have reset the clock back to zero and the debt recovery process back to start.

 

Talk to a suitably qualified lawyer with the right kind of experience

Mortgagee sales are often intertwined with legalities. It is always advisable to seek the help of a suitably qualified legal advisor like a lawyer to help protect your interests.

But some lawyers specialize in home rescue and they can do more than just advise you. You can have such a lawyer negotiate on your behalf and represent your interests.

Armed with legal expertise and experience in mortgagee sales, such a lawyer can negotiate, on your behalf, in ways that you couldn’t. They may be able to secure for you more time to sell the home without a mortgagee sale tag, get an alternative lender, or secure a more stable source of income.

 

Explore government assistance or insurance

Could it be that you are facing a mortgagee sale because you lost your source of income due to an accident, or an unforeseeable illness?

If that’s the case, you can reach out to the Accident Compensation Corporation, a Crown Entity that gives up to 80% income compensation if you are out of work due to injury.

Alternatively, check with your insurer if your policy includes some sort of loss-of-income cover. If it does, this could be a great boost to your mortgage payment efforts and an excellent bargaining chip for more time.

But you’ll need assistance from an experienced mortgage broker throughout the process.

 

Reach out to a Specialized Mortgage Broker

There are mortgage brokers who specialize in mortgage rescue and averting mortgagee sales. These brokers have a wider net of lenders whom they work with and can advise you on where to get emergency refinancing solutions, even with bad credit.

A bad credit mortgage broker can guide you through the above steps and also negotiate on your behalf with the lender. They can buy you more time to get the right solution and avert a mortgagee sale.

Can you refinance your home loan with bad credit?

Bad Credit Home Loan

The official cash rate in NZ has been on a steady decline over the last 5 years. The latest cut drove it to 1% and triggered a ripple effect to lenders who in turn cut loan interest rates. Homeowners have been enjoying this steady decline. Many have opted to refinance and shift to differently structured mortgages or cheaper loans. The end goal is to make savings on your home loan payments.

Refinancing home loans may be an easy move if your credit score is in the green. But what if your credit score sank and it’s not the same as when you took the mortgage? What if you are in the red? Can you refinance your home loan with bad credit?

Read on and find out what are your options

 

What is “bad credit” and What are the odds of refinancing a home loan with bad credit. 

Like many other markets across the globe, lenders in New Zealand are increasingly relying on credit scores as an important criterion for approving loans. However, it is not the only criterion. A credit score is a statistical approximation of the likelihood of payment of a loan based on a historical assessment of how you’ve managed your financial affairs.

 

A good credit score (often above 700 out of a possible 1000) implies that the borrower is a good financial manager who is more likely to repay a loan. The opposite applies to a low score (below 500). Most conventional lenders peg the home loan credit score at above 500 A lower score would trigger risk mitigation measures by the lender such as a higher interest rate or tougher requirements like mortgage protection insurance or both.

 

When your credit score is not so good, you’ll have a harder time refinancing the mortgage. Your goal is to convince the lender of your trustworthiness without using the credit score. This may be hard. But there are options which you can explore like alternative lenders who have less stringent credit score rules.

 

Where to check for financial assistance

There are lenders in the market who have shaped their business models to cater to people who have had credit issues previously and it affects their credit score. It’s an excellent opportunity for you to get your financial footing back, and rebuild your credit score.

 

Bad-credit home loans in New Zealand are typically offered by non-bank mortgage lenders such as building societies and credit unions. Since these institutions are often privately funded, they are not subjected to the same rules as banks. Thus, they are more flexible and can take in odd cases. But you still must make your application worthwhile. A mortgage broker for bad credit mortgages can give you directions on how to do this.

 

Making your application more attractive – highlight your positives. 

Lenders, even non-bank mortgage lenders, often view borrowers with low credit scores as risky borrowers. Therefore, for your application to catch the attention of a lender, you may need to highlight additional qualities that reflect positively on you. For instance, you can show that you’ve held a steady job over the last couple of years.

It’s crucial to show that you have a steady income. This is your ticket for fixing your credit score.

Show the lender that you have savings 

You can also show that you have savings in your bank account. Lenders like borrowers who have a sort of cash reserve which could in handy in the event of an emergency. However, a huge savings balance doesn’t count as much as consistent and steady savings over a long time. Consistent savings over time also depicts that, despite your low credit score, you have good financial discipline.

 

Bring on board a guarantor

Before you get a non-bank mortgage lender to trust you, you may require to convince someone close to you that you are a responsible borrower and get them to guarantee your loan.

This may be hard to do since it means that they will be on the hook if you fail to repay. However, your spouse or a close relative may be willing to get into the mortgage boat with you and co-sign. But he or she must have a good credit score. Otherwise, their signature will not have much of an effect on your application.

 

What will a bad credit home loan cost you?

Bad credit mortgages are typically pegged at a higher rate than the average market rate. This is because of the perceived increased risk. But the opportunity cost – the benefits that you can secure – often compensate for the costs. This is especially so when you work with an experienced bad credit mortgage broker to secure a fair deal.

 

Better still, if you keep on a steady financial path and commit to improving your credit score, you’ll probably refinance the mortgage to a better deal in the future.

So, reach out to a bad credit mortgage broker and learn how you can refinance your home loan.

Can Second Tier Lenders Help Rescue Your Mortgage?

With the banks dropping mortgage rates to historic lows, many homeowners who were in mortgage trouble are looking to get a breakthrough and perhaps reclaim their homes. However, due to tough lending criteria by banks, this drop in interest rates seems like it an opportunity that could pass you by.

If you have received a demand letter from the bank or a PLA Notice, it’s hard to negotiate with the bank. You need a rescue plan before the window closes. After all, everyone knows that the interest rates will eventually come up again sooner or later.

What are your options? Can second-tier lenders help rescue your mortgage?

 

Trying Another Bank May Not Yield Much

You may be considering to try another bank for a refinancing deal. But that’s a far-fetched ambition. Each bank has unique lending criteria. But there is a common trend among mainstream lenders. Chances are if your bank wouldn’t give you the audience, peer lenders will also reject you.

Second-tier lenders or alternative mortgage lenders are an option you should consider.

Previously, these institutions were considered as the “lenders for the bad creditors.” But that’s far from the truth. They are just alternative lenders.

Who is a Second Tier Lender?

Second-tier lenders are institutions, other than banks or credit unions, that can lend to the public but are not regulated by the Reserve Bank. They, like all other lenders, must still conform to the consumer protection laws and regulations. So, you can rest assured that there’s nothing dodgy about them. However, these institutions are often funded privately (or by specific interest groups).

That means, second-tier lenders, unlike banks, don’t rely on customer deposits to lend to borrowers. Private investors take up that role.

This deviation from the traditional banking formula accords second-tier mortgage lenders more flexibility, unlike conventional lenders and banks. However, it also means that they are limited in size, thus more vulnerable to economic fluctuations.

What are the Pros and Cons of Second Tier Mortgage Lenders?

The most obvious benefit is flexibility. When you reach out to a second-tier mortgage lender it’s not a matter of whether the computer said a yes or no to your application. You’ll have a real conversation with a mortgage officer who will evaluate your application uniquely.

Better still, if you work with a mortgage broker, the broker will help you find an ideal lender and prepare your application. This doesn’t mean that second-tier mortgage lenders don’t have a qualification criteria. They do. It’s only that it may be more flexible than banks, and applications are often evaluated on a case-by-case basis.

Traditionally, borrowers have stayed away from second-tier lenders because of higher interest rates and fees. However, second-tier lenders have become more competitive, offering rates that could rival mainstream lenders. Moreover, their services are more personalized and intimate.

Rescuing Your Mortgage

You may have encountered financial headwinds and perhaps it has spiraled to a mortgagee sale situation. If that’s your position and you are thinking that your credit record is a train-wreck or no licensed lender could rescue your mortgage. It’s time you reach out to a bad-credit mortgage broker to find out more about second-tier mortgage lenders.

They have more flexible terms and could offer you a refinancing deal to give you that much-needed break. Whether you want help for a short term (6-12 months) or a medium-term (3-5 years). You can try a second-tier lender for a mortgage refinancing deal.

It may cost you slightly more interest and fees. But, if it means getting back your home, it may worth every penny.

Experiencing Mortgage Stress? Why You Should Talk to a Specialist Mortgage Broker

Are you having a hard time making your monthly mortgage payments? Perhaps your income has significantly declined over the last couple of weeks due to a relationship breakup or an unexpected financial dip. You are probably experiencing mortgage stress and you should reach out for help.

If you have missed a couple of mortgage payments and the bank doesn’t seem to understand your situation, you should call a bad credit mortgage broker. They look beyond your credit score or bad credit history to understand your situation and help you to get out-of-the-box solutions.

Read on and find out why you should reach out to a bad credit mortgage broker experiencing mortgage stress.

Who are Specialist Bad-Credit Mortgage Brokers and How can they Help?

These are mortgage brokers who specialize in advising homeowners who are in mortgage trouble, have bad credit and need out-of-the-box solutions.

Bankers and ordinary mortgage brokers often focus on “normal” applications. If your case doesn’t meet standard policy, they would most likely reject you.

However, bad-credit mortgage brokers have an outlook that everyone deserves another chance. After all mortgage stress often comes about due to an unfortunate event like losing a job or divorce. All you need is a financial break.

Bad credit mortgage brokers work with an array of lenders, including second-tier lenders. They may help you get a fair deal with a more flexible alternative lender.

 

Why Speak with a Specialist Broker?

When you encounter financial headwinds and miss a couple of mortgage payments, the bank will demand payments. Most banks have very stringent lending, and loan management criteria. Sometimes banks may not understand your situation. If the computer says no, it’s a big NO.

That’s not the kind of audience you’d want when you are experiencing mortgage stress. Moreover, making too many applications with different lenders will make your credit score worse.

If you have missed a couple of payments, you may be staring at ultimatums and threats of a mortgagee sale.

Are you in such a fix?

A specialist bad credit mortgage broker will take the time to listen to your story. He or she will gather information about your defaults and the circumstances and propose out-of-the-box solutions. It’s much better than walking straight into a rejection by your bank or other standard brokers and lenders.

What Will the Broker Do?

When you approach a bad credit mortgage broker, expect the same kind of personal questions as you would from an ordinary broker or bank. They will also request you to complete a brief form giving details of your financial position.

However, unlike a normal mortgage broker, they will help you comb your credit report, identify and understand the ‘dark spots’ and assess if it is viable to continue with the mortgage.

If it is not viable, the broker will advise you on how to make the best of the situation. If it’s viable, the broker won’t just hand you another mortgage document looking to close a deal. They will help you find alternative lenders. They will also help you to formulate a way through the current crisis.

 

It doesn’t matter whether it’s mortgage stress due to recent events or a bankruptcy issue. You can reach out to a bad-credit mortgage broker and seek help.

Do You Need an Urgent Solution to Refinance Your Troubled Mortgage?

A mortgagee sale should not be such a distant thought if you are a homeowner in New Zealand. This thought should keep the embers firing the zeal to own a home start hot enough to stay on top of your payments.

But there are times when push comes to shove, and financial headwinds could drive you first into mortgage stress and eventually into a mortgagee sale situation.

Do you need an urgent solution to refinance your troubled mortgage?

Here are the options available for you.

To start with, be clear about this, the only remedy for failed mortgage payments is a full payment. So confine your options to what eventually leads to payment, not postponement. Temporary solutions such as injunctions and stay orders by a court or complaints to any other authority are seldom and are not permanent.

You can opt for a quick sale, liquidate other fixed assets to save your home, or refinance with an alternative lender. Here’s more on these options.

Quick Sale

If there’s no agreement on debt settlement on your troubled mortgage and the process spirals to a Notice under the Property Law Act (2007), you can go for a quick sale and avert the mortgagee sale.

A quick sale is a situation where you sell the property in the window between receiving a PLA Notice and the actual mortgagee sale. This often happens when you have accumulated sufficient equity on the home and it’s in a ‘hot’ property market like in Auckland.

Quick sales are often measures to avert the stigma of a mortgagee sale. Such a tag often attracts bargain property hunters who can drive the value down.

So, reach out to a mortgage broker to help you negotiate a deal for a quick sale with the lender.

 

Liquidate other fixed assets to rescue your mortgage

Most people are unable to think straight when facing a mortgagee sale. That’s the biggest reason why you need external help, and of course, it comes with expertise.

When a lender is breathing hard down your neck, it’s hard to think of alternative ways to raise funds to clear the debt. You may even fail to see other assets that you could sell and use the proceeds to settle the outstanding amount. Do you have an extra family car or stocks you could sell and use the money to save your home?

If the situation is desperate the Kiwi Saver can transform into an emergency fund if you are experiencing significant hardships.

 

Refinancing with an Alternative Lender

There are times when the lender just does not understand, and perhaps you just need some breathing space before you get your financial footing back.

You can reach out to a bad credit mortgage broker to help you find an alternative lender to refinance the loan.

Non-bank mortgage lenders often have more flexible mortgage terms. However, the interest may be higher than what a conventional bank charges. Nevertheless, this shouldn’t be an issue since all you want is some breathing space until you get your groove back.

 

The above solutions may provide urgent relief when facing a mortgagee sale. However, that doesn’t mean that you shouldn’t act with urgency when in mortgage trouble. The sooner you reach out for help, the better your chances of finding a great solution.

Surprising Benefits from Legal Advice When facing a Mortgagee Sale

When you miss making payments on your mortgage the lender has the right to engage a debt recovery process, especially when your loan goes into default. This may end up in a mortgagee sale situation. Anyone facing a mortgagee sale should seek legal guidance from a suitably qualified professional, like a lawyer, throughout this process. But, is legal advice necessary or is it just another way to lose much-needed cash?

Are there any benefits from seeking legal advice when facing a mortgagee sale?

Read on and find out.

 

When is it the right time to get legal help

No one wants to engage in a payment battle with a lender. However, financial ups and downs are not uncommon. When you miss making mortgage payments for about 90 days, the mortgagee (or lender) is likely to issue you with a letter of demand. In this letter, the lender will indicate the outstanding amount, including interests, any fees, and penalties that have accrued, and set a deadline date by which payment should be made.

It is a good idea to reach out to a suitably qualified legal professional when you receive such a letter. This is the first step in the formal debt recovery process.

 

But what kind of help can you get from a lawyer?

Reaching out to a lawyer is not in vain, neither is it a waste of money.  when you need it the most. Here are some of the benefits you will gain when you do so.

 

A Lawyer Will Help You Understand the Mortgage Contract Intricately

Mortgage contracts are often complex and involve various laws. When you seek legal advice from an expert, he or she will go through the contract, plus any other communication that you’ve had with the bank. They will help you to understand your rights and obligations, as well as the lender. They will also help you to understand the applicable laws that govern the administration of the loan as well as formal debt recovery.

Since most lenders have competent legal departments, they are often meticulous to ensure that they don’t breach as this could be probable grounds for action. Professional legal guidance is likely to help you to focus on the right direction – alternative solutions for mortgage rescue.

 

Help in Negotiating Alternative Solutions

When you fail to pay the mortgage according to the terms laid out in the contract, you are in breach of the contract. A lender has the right to a mortgagee sale. However, this is not the only solution available for them to recover the debt.

Chances are high that the mortgagee would be open to alternative solutions including:

  • Reviewing the mortgage structure to lower the payments by extending the loan term. (A lender is not obliged to accept. However, a lawyer can help you negotiate for it and represent you at the table.)
  • Refinancing with an alternative lender.

 

Inform You How to and Help Negotiate to Mitigate Losses 

If there’s no breakthrough in finding an alternative solution, and the lender is still pushing forward with the debt recovery procedures, a lawyer can give you information and help you mitigate losses. This is often by way of negotiating with the lender to allow you to sell the property without the stigma of a mortgagee sale.

This is often seen as a better option, and in some cases, it fetches a better price for the property.

Receiving a good price puts you in a better position to clear the debt and avoid being in debt post the mortgagee sale.

 

Ensure that the lender plays by the rules

During all these negotiations and discussions with the lender on debt recovery, the lawyer will help you ensure that the lender plays by the rules. This includes giving you rightful notice, ample time, they do not mistreat you, and they follow the right channels to ensure the property gets the “best price.”

If the lender is found to have breached some of the rules, the lawyer will advise you accordingly

Here’s a Method That’s Helping Hundreds to Manage and Get Rid of Mortgage Stress

How to get a home loan if you have bad credit

With home loans hitting record lows since the reduction of the OCR to 1 per cent, the quest for homeownership surged in New Zealand. Of course, this has triggered demand-pull inflation on house prices. However, as the mortgage size gets bigger, more Kiwis are experiencing mortgage stress. But not all are succumbing to the stress. Many have learned how to manage and get rid of stress. Here’s how they did it.

What is mortgage stress

As the average size of home loans in New Zealand gets bigger, Kiwis are digging deeper into their pockets to service the mortgage payments. This not only puts a strain on other expenditure, but it also jeopardizes the mortgage.

More New Zealanders are straining their budgets to make mortgage payments and the bloating consumer debt isn’t helping.

When you strain to make mortgage payments you are likely to experience mortgage stress.

What causes mortgage stress

Many factors can trigger mortgage stress. However, the descent is often gradual and predictable. For starters, when you buy a home that you are struggling to afford, it sets you up for mortgage stress. You can also experience mortgage stress due to overly high repayment amounts. Also, when your home budget is burdened by high expenditure on revolving debt, you are on the brink of mortgage stress.

These factors create pressure on your budget leaving you susceptible to triggers such as”

How to avoid it

The best way to handle mortgage stress is to avoid it. But we all know that it’s highly unlikely for anyone not to feel stretched by mortgage payments. However, with careful planning you can keep the payments stress at bay by taking these steps:

  • Keep yourself to realistic limits when buying a house. As the adage goes, cut your coat to your size.
  • Keep revolving debt at a minimum.
  • Test as many what-if scenarios concerning your income (prepare for the worst).

Work with an experienced mortgage broker and evaluate different lenders’ products, policies and customer experiences as well as trends in the market interest rates.

If you’re experiencing mortgage stress, here’s how you can manage the stress.

 

Managing and Getting Rid of Mortgage Stress

How well do you handle your finances? Are you spending too much on stuff you don’t need? Do you have a high debt burden, especially revolving debt? Reach out to a financial advisor to help you get your act together.

If bad budgeting or high revolving debt burden is not the issue, reach out to your lender and seek ways to reduce the regular payments. Check if you can:

  • Get a mortgage holiday (Although this is not advisable and only restricted to situations of serious financial hardships). You can consider taking a short break during which you pay interest only.
  • Review the payment schedule, say from weekly or fortnightly to monthly.
  • Extend the mortgage term.
  • Refinance to a lower interest rate option.

The first three options will help you manage mortgage stress. But you’ll be in debt for longer and you’ll pay more interest. On the other hand, refinancing to a lower rate mortgage is your best way out. But it’s hard to do this especially if you got late on some payments and your credit score plummeted. The lender may not understand your situation. Talk to a bad credit mortgage broker and find a way to get rid of the mortgage stress.

Can’t Pay the Mortgage Any Longer? Here are Your Options

If for any reason you raise enough money to pay for your mortgage and you are worried that you may miss a payment or more call the lender right away. You should also reach out to MoneyTalks or www.familyservices.govt.nz/directory and get connected with financial advisers and mentors who are ready to help you avoid a mortgagee sale.

Here’s more on the options available to you.

Call the Lender First

Your first line of defence should be the lender. Conventional mortgage lenders in New Zealand are obliged to listen and work with you to find an amicable solution. However, this only holds if you make the distress call before your loan goes into arrears. In turn, most lenders in New Zealand have set up programs to handle hardships and avoid mortgagee sales.

 

When you reach out to the lender, the officer will ask you a few personal questions and request you to fill out a statement of financial position. The lender will be trying to establish:

  • Why you cannot make the payments.
  • Whether it’s a long-term or short-term issue.
  • Your financial position. That is your income, expenses and assets like stocks and savings.

You should also reach out to the lender because it’s the mortgagee. Thus it bears the title and can opt to mortgagee sale your property.

After you’ve had a chat with the lender, it will evaluate your situation and recommend ways you can mitigate losses.

 

Seek insurance (ACC) or government assistance

If you can’t pay the mortgage any longer due to income loss occasioned by an unforeseen injury, you could have another way out.

Did you know that from the levies you pay, such as vehicle license and fuel taxes, you get accident insurance?

Well, the Accident Compensation Corporation (ACC) is a government entity that provides accident insurance scheme. ACC’s no-fault scheme covers everyone in New Zealand if they are injured in an accident. It doesn’t matter whether you are employed or run a business. But the best part is the cover does not only contribute towards treatment costs, but it also provides some help with your income.

If you are unable to work due to injury, visit an accredited doctor who will advise whether you are eligible for compensation. Plus, if the doctor recommends time off for more than one week, you can qualify for a compensation of up to 80 per cent of your average income.

The extra dollars will certainly go a long wat to help you avoid a mortgagee sale.

 

Refinance

Reach out to a mortgage broker and explore the option of refinancing to a more affordable loan.

Mortgage brokers will advise you on the current market trends, and interest rates. They will also advise you on the best-fit mortgage structure and whether it is viable to refinance to a more affordable option.

Nonetheless, many lenders put barriers and refinancing a mortgage is often not so easy or affordable. Costs such as breaking fees, valuation fees, legal fees and others may erode the savings you are looking to make.

Before you refinance, have an exhaustive discussion with an experienced mortgage broker.

 

Sell the Home

Lastly, if you have accrued sizeable equity on the property, and none of the options above seems to work, consider selling the home.

It’s a tough choice, but you know that it’s better to quit when you are ahead. It’s a better option than facing a mortgagee sale.

Sell the home and use the cash to buy a more affordable home. Who knows, you may have some leftover cash from the sales proceeds to handle other urgent financial needs.

Hidden Reasons Why You’re Experiencing Mortgage Stress – and What You Can Do

Mortgage stress creeps on you when you spend more than the recommended proportion of your income on your instalments. It’s often an early sign of a homeowner who may end up in a mortgagee sale. Mortgage stress is often triggered by factors beyond our control like rising interest rates or economic depression. However, the real reasons why you may be experiencing mortgage stress are often hidden. You must be willing to search within yourself to find out.

Here are some of these reasons and what you can do.

You Bit More Than You Could Chew

One of the most common reasons why many Kiwis experience mortgage stress is taking unaffordable home loans. The average home loan for a first time home buyer in New Zealand has been rising. At the same time, low-deposit home loans have also been on an upward trend.

Expensive homes seem to be affordable due to ordinary kiwi. However, homeowners don’t envisage an economic downturn and how it could hurt their mortgage payments.

Could it be that you bought an expensive home?

One of the best ways to avoid making this error is by working with an experienced mortgage broker. They will help you to work out a comfortable budget and create a buffer which you can use as savings for a rainy day. Alternatively, you could sell the house and use the proceeds to downscale to a more affordable home.

 

Loan structure just wasn’t right for you – refinance and get the right structure

The most common mortgage structure in New Zealand is the table loan. In this model, lenders even out payments throughout the entire loan term. Changes only happen when interest rates shift or the lender chooses to adjust the rates.

Unfortunately, table loans are designed such that a bulk of the initial payments are allocated the interest, not principal. The proportion evens out much when the loan is more than seven years.

The challenge with this structure is more psychological. Despite making several payments worth thousands of dollars, the principal amount you owe moves by just a couple of hundreds of dollars. Worse still, if the interest rates rise while you are in the early stages of the mortgage, the monthly bill rises significantly and it could push you to mortgage stress.

You can avoid such a scenario by changing to a revolving credit mortgage or an offset mortgage.

Too Much revolving credit – refinance and consolidate

With the unprecedented rise in revolving credit among Kiwis, mortgage payments are feeling the heat.

Homeowners are spending more on credit cards, payday loans and other revolving loans.

When the debt burden exceeds 30 per cent of your pre-tax income, you are likely to experience mortgage stress. If that’s your situation, reach out to a mortgage broker or a qualified financial advisor for assistance on consolidating your debts.

 

Consolidation of your loans may take you slightly aback on the mortgage bill. But the relief of removing the pressure of high-interest loans is worth the move.

 

These hidden triggers of mortgage stress can affect anyone. Use the information above to prepare for your counterplan.