How to Stop a Mortgagee Sale Before It’s Too Late 

How to Stop a Mortgagee Sale Before It’s Too Late

Life can throw a curve ball at anyone. Perhaps you are facing an income dip and just cannot afford your mortgage payments anymore. There’s lots of advice out there about how you can raise extra income, including renting out the house while you downgrade to a smaller more affordable home, to pay-off the mortgage.

But what if you don’t want the hassles of being a landlord?

What if you cannot attract rent that’s sufficient to cover the mortgage bill?

Even if you are willing to let go of the home, you should still avoid a mortgagee sale. A mortgagee sale will damage your credit standing. Plus, you may still owe the lender even after recouping proceeds from the sale.

Use these steps to stop the mortgagee sale before it’s too late.

Reach out to a Financial Advisor and Review Your Position.

You should have done this way back when you started experiencing financial difficulty. But, it’s not too late. If you have a registered personal consultant that’s great news. Go ahead and reach out. If you don’t and are concerned about how much you’ll pay you can try:

Talk about your financial position. Review your budget and see what you can afford.

As you engage with the financial adviser, don’t forget to reach out to the lender and talk about options including restructuring the loan, refinancing or a mortgage holiday.

If none of them work out, have your lawyer talk with the lender’s lawyers and seek more time and more options as follows.

Refinance

This is a mortgage with a different lender, this won’t change the fact that arrears may have occurred or your financial position. Nonetheless, if you feel that your current bank or lender doesn’t have the right terms for you. Or, perhaps you’ve come across another bank that has more appealing terms, then you can request a transfer of credit.

Mortgage brokers can help you arrange for refinancing with other reputable and more flexible lenders. The rate might be slightly higher, but it may be the straw that saves you from drowning and buys you more time.

Get a Guarantor

Guarantors too may not change much of your financial status. But, a good guarantor could go a long way in reducing the risk faced by a lender, if they could be open to that. Also, a lender who has already served you with a notice served under the Property Law Act (2007) may be more considerate and willing to give you more time to get affairs in order or discuss alternative arrangements – however this not a guarantee.

Sell the House

The bottom line for anyone who wants to stop a mortgagee sale is; get your finances in order and reach out to the lender. None of the steps above will work if your finances are not in order or don’t talk with the lender. You will still be facing a mortgagee sale.

A notice served under the Property Law Act (2007)gives you a window of at least 20 days before the lender can move to mortgagee sale the property. This time is too short to get a good price and sell the home.

You must reach out to the lender and seek an extension of the deadline. They don’t have to agree with you. But lenders also abhor mortgagee sales and would rather have you sell the property without the stigma of a mortgagee sale. It attracts a better price.

How to Avoid a Mortgagee Sale on Your Investment Property

How to Avoid a Mortgagee Sale on Your Investment Property 

Many people wish to own an investment property, however very few people have the liquidity of cash to buy a property outright, so having a mortgage is one of the best ways of owning an investment property in New Zealand, many banks prefer dealing with investors. Low-interest rates make it viable to grow your property portfolio by accumulating capital through mortgage facilities. Apart from the asset securing itself, you’ll accumulate equity rapidly through the income earned. However, poor planning can land you on the mortgagee sales list. 

You will drop from being a property mogul to pauper if you don’t follow these steps to protect your investment property

Thoroughly Assess Your Ability to Repay Each Mortgage Application. 

Before you apply for any mortgage facility, have a sit down with a mortgage broker, a lawyer, and your accountant. The mortgage broker will help you understand existing deals, the banks or lenders and which one will give you the best deal. 

Your accountant will be there to advise you on your financial capabilities. 

Assess your ability to repay each mortgage independently. 

If your accountant gives you a green light on the cash flow, you can move ahead and begin the mortgage process

Prepare a Robust Business Plan 

Whereas real estate is a lucrative business in strong mortgage markets like Auckland, unless you have a robust business plan, you have no business doing business. Otherwise, you’ll find your properties on the mortgagee sales list faster than the fall of giant construction companies in New Zealand   

Your plan must address the following questions: 

  • What is the business all about? What are the mission and vision? 
  • Why are you in this particular business? What’s your motivation and what are your goals? 
  • Have you carefully crafted plans of how to make the business succeed? 
  • What types of properties do you plan to invest in? In which locations? And how will you make money from your investments? 
  • How much income do you expect to earn from your investment? 
  • What risks do you face and how will you mitigate them? 
  • Who are your competitors? 
  • What are your strengths and how will you leverage them? 

Make sure you answer each question thoroughly and get a professional to help you figure out how to answer

Leaving out Some Expenses Could Put You on the Mortgagee Sale List 

When paying off a mortgage, it’s easy to emphasize on the monthly repayment figure and leave out other, relatively smaller expenses, from your list of costs. 

Remember, it’s the little foxes that destroy the vineyard. 

Overlooking smaller costs such as regular repairs and insurance eat into your principal. If you don’t minimize these costs or include them in your calculations the home could end up in the mortgagee sales list

Plan for Low Rental Seasons and Vacant Periods  

Just like any other business, real estate also experiences high seasons and low seasons. However, vacant periods are more common in real-estate. 

If you are buying the home to rent it out, you will experience periods when the home is unoccupied. This often happens when one tenant vacates and you have to keep the home vacant for a while as you perform renovations, and while you await a new tenant to show up. 

During the ‘vacant period,’ the bank or lender will still expect full mortgage payments. 

It’s up to you to plan how you will make the payment despite not having a paying tenant on the property. 

Finally, Consider Inflation 

Whether it’s a fixed-rate or a floating-rate mortgage, lenders keep reviewing the interest rate because of inflation or different factors. 

The question you should ask yourself is, do you review the rent charged in line with inflationary forces? 

If you don’t, your investments could be costing you more than what you are earning from them. 

Such an imbalance will lead to the mortgagee sales list. 

Facing a Mortgagee Sale? Here Are Some of Your Rights and What to Expect from the Lender

Facing a Mortgagee Sale? Here Are Some of Your Rights and What to Expect from the Lender 

The process of Mortgagee sale can be a stressful one, more so to the distressed homeowner. Although the bank or lender has the right to look out for their interests, the odds are often in their favor. A broke homeowner stands no chance against resource-rich lenders. 

Fortunately, we have a robust justice system backed by several laws to protect you. The lender must also meet certain obligations in a mortgage contract. Here’s a look at some of your rights and the obligations of the lender. 

Your Rights During the Mortgage Process 

Mortgage contracts are complex and many consumers hardly understand the kind of financial commitment they are signing into. Several laws protect the borrower’s interests and help to avert mortgagee sales scenarios. These legislations may include: 

Besides, the Responsible Lending Code compels lenders to observe the following guidelines during the mortgaging process: 

  • Ensure that the mortgage is suitable for you. 
  • Check that the borrower can afford the facility. 
  • Help the borrower to understand the mortgage terms. 
  • Ensure that the home loan is not overbearing. 

The mortgagee sales process also is not simple and takes time. The lender must issue a letter of demand and serve you with a Property Law Act (PLA) Notice before going for the mortgagee sale. If the lender has already issued a letter of demand, here’s more on your rights and what you should expect from the bank or lender. 

The Right to Explain Your Financial Hardships and Negotiate a More Comfortable Payment Plan 

Although it is in your interest, you have the right to talk to your lender as soon as you miss a payment. When you approach the lender you should: 

  • Explain why you are unable to make the payment. 
  • Be clear that you understand you must make payments. 
  • Propose ways to help you avert defaulting. 
  • Request for help from the lender. 

The lender can discuss solutions such as restructuring the loan to help you cope with a prolonged income dip. If you’ve experienced a sudden loss of income or loss of supporting partner (through death or divorce) but you expect to regain financial stability, the lender can consider a repayment break. 

If you move before your mortgage goes in the red, the lender has no option but to work with you to avert a default and mortgagee sale

The Right to A Letter of Demand and A PLA Notice 

Before a lender moves to mortgagee sale your home, the lender must have issued you with a letter of demand. If you don’t meet the conditions of the letter, and cannot agree with the lender, the lender can serve you with a Property Law Act, (2007) Notice. 

The Notice gives at least 20 days after receipt for the homeowner to remedy the defaulted mortgage. 

You can still talk to your lender even at this point

The Right to Legal and Financial Advice 

If you cannot pay, or meet the conditions set out the PLA Notice, and you’ve not agreed on a solution with the lender, you can talk to qualified financial advisors such as mortgage brokers to get alternatives. Also, ensure that you seek legal help from a qualified professional like a lawyer

The Right to Fair Valuation and a Reasonable Rales process 

The last step is the actual mortgagee sale. Before the lender puts up the property for sale, they usually must conduct a fair valuation. Plus, the selling agent must strive to hit the market price. 

Remember, if you’ve been making payments for a while, a portion of that home equity belongs to you. On the other hand, if the home fetches a low price, that doesn’t cover mortgagor costs and the outstanding mortgage and interest, the lender could take recovery action. 

These rights will help you to keep your head high even amidst a mortgagee sale. 

Facing a Mortgagee Sale? Here are 4 Ways You Can Slow It Down

Facing a Mortgagee Sale? Here are 4 ways which may help the process 

Without a doubt, facing a mortgagee sale is a scary prospect. Nonetheless, receiving a PLA Notice does not necessarily mean that you will automatically lose your home. You can do many things to help which may buy more time; this could help you to get back on your feet and at least keep your financial record in the best possible shape. 

Read on and find out what you can do to slow down the process. 

What’s a Mortgagee Sale? 

If you signed up for a home loan, you’ve agreed to charge your home’s title to the bank or lender. You also agree to pay back the entire loan according to the terms set out on the mortgage contract. Failure to pay or any other breach of the contractual terms gives the lender (mortgagee) the right to issue a notice under section 119 of the Property Law Act (2007) to recoup their investment. 

A mortgagee sale happens when the bank or lender forcefully sells a property to recover a loan. 

PLA Notices usually give a window of about 20 days for the homeowner to remedy the situation. This is a short time to make things happen. 

How Can You Slow Down the Process? 

First, Educate Yourself 

It may sound ironic because of the amount of stress you have to deal with, but this is the time you need to have as much information about the mortgage, and lender, as possible. 

Take some time and read over all communications from the lender concerning the mortgage. They are likely to have information about the lender’s mortgagee sale process, and ways you can salvage it. 

It’s advisable to get help from a qualified legal professional, like a lawyer, as you go through these communications. You will understand them better. Plus, legal assistance may identify areas where you can challenge the contract or PLA Notice. 

Reach Out to the Lender 

If you have a PLA Notice at hand and you would like to save your home, you have no option to do what you should have done eons ago. Reach out to the bank or lender. 

When you reach out to a lender you should: 

  • Explain why you missed payments. 
  • Make it clear that you understand you must pay back according to the contract terms. 
  • Propose possible ways you can catch up. 
  • Request for assistance from the lender to get back on track including restructuring the loan or refinancing. 

Clearly, this step should be taken sooner than later. Receiving a PLA Notice means you’ve not taken action on previous alerts.  

But don’t let this stop you now.  

Banks and mortgage lenders also prefer working out a solution with the homeowner as opposed to turning to mortgagee sales. It explains why the statistics of mortgagee sales in strong housing markets like Auckland are so low.  

Get in Touch with a Mortgage Broker 

Mortgage brokers will help you to organize your finances and offer diverse solutions. 

They will help you come up with a plan; this can either be a short-term solution, such as refinancing for a six to twelve months period where you organize your affairs or sell your property. Or you can get long-term solutions, like refinancing through the same or a different lender. 

Finally, Consider Selling the Home 

If you must give up the house it may be best that you do this on your own terms, this means engaging a real estate agency to sell the property which typically helps you obtain a higher price.  

Lenders have an obligation to follow a fair selling process. However, the stigma of a mortgagee sale can significantly drive down the selling price of a property. Lenders know this and many give leeway for the homeowner to sell the house without the stigma. 

Try to ask for an extension of the PLA Notice deadline. 

Just Received a PLA Notice, What’s Next?

Property Law Act PLA Notice What Does It Mean Help

What happens when you can no longer afford to pay your mortgage? 

Calamity can strike any person. It could come in the form of being laid off at work, a failed contract or legal action if you are in business, or a personal issue like divorce, death or an accident. Whatever the case may be, home loans are secured facilities, and failure to meet your end of the bargain could result in a mortgagee sale. 

But before the lender sells the property, they must notify the homeowner of the intended action through a Property Law Act Notice. 

If you’ve just received a Property Law Act Notice, read on and find out what to expect next, as well as what action you can take. 

What is a PLA Notice? 

Before the lender (mortgagee) takes any action to recover the loan, they must serve you with a Default Notice under Section 119 of the Property Law Act (2007). This notice gives the following details: 

  • The defaults under the mortgage. 
  • The value of the arrears and any penalties.  
  • Date by when you should remedy the situation. Usually, the deadline date is within 20 days of the date of receipt of the notice.
Why Have You Received a PLA Notice? 

Lenders and banks often turn to mortgagee sale property as a last resort action. This is when the homeowner is unresponsive or uncooperative. 

Usually, mortgage lenders and banks exhaust all possible means of recovery under the mortgage agreement before resorting to mortgagee sales. This may partly explain why there’s a slump in mortgagee sales.  

You have received the PLA Notice not just because you’ve persistently defaulted on the mortgage, but also because you have not reached to a workable solution with the lender. 

What Next? 

Seek Legal Advice 

The process of a mortgagee sale is a complex legal process with many technicalities. You may not be well-equipped to handle such negotiations. Get help from qualified professionals such as lawyers who have specialized in property law as well as experienced mortgage brokers. 

Contact the lender 

If you’ve received the Default Notice, make an effort to contact the lender. Your objective will guide the kind of discussions you will have. Do you want to rescue the mortgage? Or you can no longer afford the mortgage payments, so you want to make the best from the situation. 

Whatever the goal is, time is not on your side and you should reach out to the lender to seek an extension of the Notice date so that you have time to negotiate. 

Work out a Mortgage Rescue Plan 

If you intend to save the home, ask the mortgage broker to help you work out a plan to refinance the mortgage and offset the demands on the Notice. On the other hand, if you don’t plan to keep the home, negotiate with the lender so that you may sell the property without the stigma and pressure of a mortgagee sale. You can ask your legal counsel to help you draft an agreement between you and the lender. 

Lastly, Follow through on Your Commitments 

Whether you want to sell the property or rescue the mortgage, you must make commitments and strictly follow through on your promises. 

Remember, if the bank mortgagee sells your property, it’s not a guarantee of the end of the loan. The main thing to remember is to seek advice from professionals and ensure you can create a solution that works for you and your family.  

Why You Need a Skilled Broker to Get You Out of a Mortgagee Sale

When you purchase a property and get a mortgage, the bank or lender has an interest in the property and puts a charge against the title of the property for as long as the loan is outstanding. The lender is obliged to discharge the title once you have paid the entire loan.  

What happens if the debtor or mortgagor cannot fully repay the loan? 

The Property Law Act (2007) gives the bank or lender (mortgagee) the right to “call up” the loan; by way of notice, as payable, the entire principle, interests, and any fees secured by the mortgage. If the amount is not paid by a specified date on the notice, the lender can sell the property and recover the loan. Thus the term “mortgagee sale.” 

If you are in a mortgagee sale situation, one of the most crucial people you must have close by is a mortgage broker. Read on and find out why you must have a skilled broker by your side. 

Brokers Know About Mortgages 

Bankers and other lenders know a lot about mortgages. However, mortgage brokers are a step ahead. They combine in-depth knowledge of different mortgage products and processes. Plus, mortgage brokers in New Zealand are certified for technical competency and registered under the Financial Advisers Act. 

They combine: 

  • Technical expertise. 
  • Professionalism. 
  • Market knowledge 
  • A personal touch. 
  • Flexibility. 

A skilled broker will not just offer incredible advice on how to manage your finances and structure a mortgage so that you don’t default. He or she is your best bet at developing workable solutions for a good outcome.  

Brokers Have a Broader Understanding of the Market 

Skilled mortgage brokers don’t just know a lot about mortgages products, they also have an in-depth understanding of the market. This is a vantage point for people who opt to work with mortgage brokers. Unlike bankers, brokers are not confined to a limited perspective and can work with more providers and think outside the box. When you work with a mortgage broker, you have the opportunity of receiving a ‘bird’s eye view’ of the market and your options. Plus, mortgage brokers deal with a wide variety of must-have, support professionals such as property lawyers, realtors and registered valuers. 

Brokers Know Where and How You Can Get Financing Deals Even with Bad Credit Rating 

Securing an alternative lender is a vital strategic move when you want to stop a mortgagee sale. 

However, due to the default on the existing mortgage, your credit rating absorbs a heavy blow making it harder to get approval for any loan facility.  

Mortgage brokers deal with a variety of lenders, including non-bank lenders. Brokers can help you secure an excellent deal to refinance your mortgage and get you out of a mortgagee sale. 

Finally, Brokers Have Your Interests at Heart 

When facing a mortgagee sale, representatives from the bank or lender have one thing in mind, to recover the loan. However, mortgage brokers, since they are only intermediaries, can look at the mortgagee sale situation from your point of view. 

Perhaps you encountered financial hardships and there’s little chance of making a comeback. A skilled mortgage broker can help you to decide what the best plan may be, which could include selling the property without the ‘mortgagee sale stigma.’ It gives you a better chance of attracting better prices.  

Act fast and speak to your lender. Reach out also to a skilled mortgage broker. You’ll have a better chance of obtaining a good outcome.  

Mortgage Holiday During the COVID-19 Crisis: To Take or Not to Take

Mortgage Holiday During the COVID-19 Crisis: To Take or Not to Take 

As news of  Grant Robertson’s announcement on the 24th of March went round, many homeowners were left wondering whether to take or not to take the mortgage holiday.  

A mortgage holiday amidst the coronavirus crisis is a welcome break from all the anxiety and cash flow stresses.  

But on the other hand, financial advisors often counsel against taking mortgage holidays. Even banks don’t encourage clients to take holidays. Most lenders reserve it for clients experiencing financial difficulties.  

If you are wondering whether a mortgage holiday would be beneficial or not read on and find out.  

What’s a Mortgage Holiday 

When a bank grants a homeowner a mortgage holiday, it gives you a break from making regular mortgage payments. The break is only temporary and excludes any penalties, unlike a missed payment. The mortgage will also not be reported as a defaulted loan to the credit reference agencies. However, interest still accrues. 

The length of the break is usually predetermined.  

In this case, the  government and retail banks agreed on a 6-month scheme to cushion clients affected by the COVID-19 pandemic. 

Why take the Holiday 

Mortgage payments constitute one of the biggest regular expenses by homeowners. A drop in one’s income will result in missed payments and anxiety over continued ownership.  

When facing an unprecedented financial strain, it makes sense to freeze such payments. It will give you peace of mind until you can sort out the cash strain, or at least until the storm clears.  

What Happens to the Mortgage While You are on Holiday? 

While you are on holiday, you’ll get a chance to work out your finances. But the bank doesn’t stop earning from the loan. The mortgage will continue to accrue interest during the holiday. 

It’s like taking a break from work due to work-related stress. But you leave no one to handle the work. When you get back, you’ll find piles of work which could cause more stress. If you have an outstanding mortgage balance of about NZ$400,000 at 4.5%, and about 20 years to go, you’ll accrue about NZ$10,000 during a 6-month mortgage holiday.  

You’ll still owe the bank. But now, the outstanding amount will have increased.  

Who Should Take the Holiday 

Anyone experiencing financial difficulties can consider a mortgage holiday as a possible solution. But keep in mind that it’s only a brief reprieve. Therefore, the financial challenges you are experiencing should also be temporary. If you are not sure when the storm will clear, a mortgage holiday could be a recipe for deeper woes in the future. 

But you shouldn’t stop at that. Expect to make bigger mortgage payments.  

If you are not sure about either of these outcomes, don’t stress. There are alternatives to mortgage holidays.  

What are the Alternatives? 

When facing financial difficulties, such as the COVID-19 pandemic, you need cash in your pocket more than ever before. If you are not ready to take the financial hit that comes with the holiday, consider these options: 

  • Convert the mortgage payments to interest-only during the crisis period. 
  • Stretch the mortgage term to reduce the monthly payment amount.  
  • Refinance to a different or cheaper home loan option.  

These options could reduce the payment amount considerably leaving you with more cash.   Eligibility depends on criteria, circumstances and other factors. 

Are you wondering whether to take or not to take a mortgage holiday? Check how much it will cost you. Are you ready to pay the extra interest? If yes, are you certain that you’ll bounce back and when the storm will clear? 

Talk with a mortgage broker and learn more about the mortgage holiday and your options.  

Mortgage Holiday: What Every Home Owner Must Know Before Applying

To cushion homeowners in New Zealand, the government agreed with lenders on a mortgage holiday scheme. The  lenders will offer a 6-month  mortgage holiday to Kiwis whose incomes have been affected by the COVID-19 pandemic.

Not all the details are out. However, before you sing Hallelujah, think twice. Back in 2009 when Prime Minister John Key floated the same idea, Rachel Grunwell and Nicola Shepheard  termed it as a “holiday from hell.”

A mortgage holiday means a bigger bill in the future and you shouldn’t buy in unadvisedly.

Here’s why

How a Mortgage Holiday Works?

A lender could extend a mortgage holiday as one way to help a homeowner who is facing financial difficulty and unable to make mortgage payments.

The intervention entails the bank “freezing” mortgage payments for a predetermined time. This enables the troubled homeowner to reorganize their financial position or wait out the storm.

During the holiday, mortgage payments are suspended and the bank does not report the loan as defaulted. Therefore, your credit score remains intact. The bank also does not charge penalties for missed payments. However, interest still accrues.

At the end of the mortgage holiday period, your credit record will be clean but with a bigger mortgage bill.

 

How Much Will a Mortgage Holiday Cost You

Although the bank freezes payments to the mortgage account, ordinarily it would not stop interest from accruing.

Suppose you took a mortgage of NZ$ 450,000 for a 30-year term, and you’ve been paying for the last five years. If the home loan is on a reducing balance structure, interest accrual over the 6-months mortgage holiday will amount to about NZ$10,000. If you stretch the holiday to a year, you will accrue slightly about NZ$19,000 in interest. You can call it a bonus for the bank for giving you a break.

The extra amount will be spread over your remaining payments after the holiday is over.

A mortgage holiday is like taking a loan, secured by your home, of NZ$19,000 and splashing the cash on frivolous expenditure. No one is doing that now.

 

What’s the Alternative?

The COVID-19 situation presents unprecedented challenges to everyone. If you’ve lost a significant chunk of your income, a mortgage holiday may seem appealing. But it is a short-term solution that leaves you with a bigger mortgage bill.

Rather than opting to “freeze” some payments, including the mortgage, consider adjusting to minimal payments.

Concerning the mortgage, consider switching to interest-only payments during the crisis season. Then focus on trimming your expenditures and mopping up as much cash as possible from the non-essential expenditure. Look to slash your credit card payments, fuel, entertainment, and travel spending. The  recent containment measures  will help you keep such expenses in check. Then channel the savings to vital expenses such as mortgage payments.

 

You can also consider refinancing the mortgage to a cheaper option. However, you need expert help, such as an experienced mortgage broker, to evaluate the market and the effect of switching lenders.

 

To conclude, during this time of crisis, you should be looking to make progress in one of the most important personal finance objectives, lowering your debt level. Unfortunately, a mortgage holiday does not help you achieve this goal.

Mortgage Holiday, Myth or Panacea for Covid-19 Mortgage Trouble

During the 2008-2009 financial downturn,  Prime Minister John Key recommended  a 12-month mortgage holiday. This year, the government has offered  homeowners the same remedy once again amidst the Covid-19 crisis. 

But what’s a mortgage holiday? How does it impact your mortgage? Is it the only option available for homeowners during financial hardships?

Read on and find out more about mortgage holidays.

What’s a mortgage holiday?

A mortgage holiday is not a gift. It’s an additional debt which is extended by the bank under special circumstances. Homeowners are allowed to freeze mortgage payments for a while. However, interest continues to mount.

Mortgage holidays have always been available under normal circumstances. They are offered as a safety net program for borrowers undergoing financial hardships.

 

But these are not ordinary times for everyone. The  economic effects of the Covid-19 health crisis are far-reaching and will impact  the mortgage markets. This was the motivation behind the government’s move to strike a deal with the banks and fast-track mortgage holiday process.

 

How does a Mortgage Holiday Work?

Mortgage holidays often feel like the perfect remedy for homeowners facing financial hardships. But they are not good for everyone. This is because you’ll end up paying more.

According to researchers at Moneyhub, a 6-months mortgage holiday on a loan balance of about NZ$500,000, at 4 per cent and a remaining term of 20 years will inflate the costs by an additional NZ$15,000.

You may get a brief break. But the interests continue to mount, and the ‘holiday’ snowballs to a giant additional cost.

What options do homeowners have?

 

Convert the Mortgage Payments to Interest-Only 

You can reach out to the lender and request for a conversion of the mortgage payments to interest-only. This significantly reduces the value of each instalment. But more importantly, it doesn’t accrue additional costs, unlike the mortgage holiday.

 

It’s a great plan to keep payments at the minimal. At least until the crisis is over.

 

Nonetheless, it’s hard to find a homeowner who’s dealing with one loan – the mortgage.

Most kiwis have to find ways to settle their credit card balances, and other consumer loans besides the mortgage payments. Therefore, a more holistic view is more appropriate.

 

Take a Top Up and Use the Cash to Settle High-Interest Debts

Mortgage holidays are great. But they don’t answer the question about what to do about revolving debt and other short-term debts. These high-interest debts could be the reason behind the cash strain.

You can consider taking a top-up loan on your mortgage and use the cash to settle high-interest debts. It will immediately take the pressure off from your cash flow and enable you to focus on the more important debt – the mortgage. Plus, if there’s leftover cash, after settling high-interest debts, you can use it to make advance mortgage payments.

You will have to pay more interest on the mortgage. But, you’ll have peace of mind, and focus on the one important thing.

Finally, Refinance to a Cheaper Option

The Covid-19 crisis has rattled the economy. But at least homeowners have one thing going their way  – record-low mortgage rates.

 

Use this opportunity to scope the market for opportunities to save. But don’t work alone. Get help from an experienced mortgage broker. They will advise you on the above instalment-reduction options, give market insights, and help you assess the implications of refinancing.

You don’t have to take a mortgage holiday. Refinancing to a cheaper option will not only help you to make the instalments more affordable; you will make long-term savings on mortgage payments.

Can You Challenge a Defective PLA Notice

Can You Challenge a Defective PLA Notice? 

According to New Zealand’s Property Law Act (2007), a mortgagee reserves the right to call up as payable, the entire principal amount, interest, and any fees and penalties being secured by a mortgage if the mortgagor (you the homeowner), stops paying their repayments, defaults or fails to meet or perform obligations as agreed on the contract. The mortgagee issues a PLA Notice to set in motion a mortgagee sale process. 

Section 119 of the Property Law Act (200) stipulates what the Notice should convey to the mortgagor. 

But what if the lender serves a defective PLA Notice? Can a mortgagor challenge a defective PLA Notice? 

Read on and find out more about PLA Notices and the threshold for defects. 

What Should the PLA Notice Convey? 

A mortgagee should give notice under section 119 of the Property Law Act if a mortgage is in default. The notice conveys a demand for remedial action on a defaulted mortgage. It also gives a period within which action should be taken. 

In the notice, the lender must adequately inform the homeowner of: 

  • The nature and magnitude of the default; 
  • The action the mortgagor should take to remedy the default; 
  • A time limit in which the default must be remedied; and 
  • The consequence of failure to remedy the default.
     
How is A PLA Notice Served? 

When the lender drafts a PLA Notice, they must ensure the homeowner receives it. This means it must be served in person. However, if the lender cannot reach the homeowner, the lender has the option of publishing the notice in a newspaper. 

What if the Lender Issues a Defective PLA notice? Can You Challenge it? 

New Zealand has a robust justice system and all Kiwis enjoy the right to justice. This includes the right to seek legal redress when a person feels aggrieved. 

So, yes! Anyone can challenge a PLA Notice if they feel it is defective or violates their rights. 

This is partly why you must seek legal guidance, from an independent, qualified professional such as a lawyer, when facing a mortgagee sale. 

Amongst many court cases filed against lenders, Gary Owen Burgess’ case against TSB Bank stands out. 

Case Law Review 

In Gary Owen Burgess vs TSB Bank, Gary, the mortgagor, challenged a ‘defective’ PLA Notice issued by TSB Bank. His claims were: 

  • That the PLA Notice did not adequately inform him of the actions required to remedy his defaults. 
  • The Notice wrongly claimed interest that was not due at the time of issuance of the Notice. 
  • The Notice failed to adequately inform him of the consequences of not remedying the default. 

Unfortunately for Gary, the Court ruled against all his claims.   

Of key importance is what Justice Gendall, of the High Court, noted in his ruling. 

The High Court ruled that none of the alleged defects had materially prejudiced Gary’s position to such an extent as to invalidate the Notice. 

Here’s the bottom line. If you’ve received a PLA Notice, you stand a better chance to stop the impending mortgagee sale by negotiating with the lender. As you’ve seen in Gary’s case, before you challenge a ‘defective’ Notice, the defects must be seen to have materially prejudiced your interests as the mortgagor. Banks and lenders are sticklers for rules so the best bet you have is working with a lawyer and using common sense to overcome these isssues.