Tips to Help You Avoid Defaulting in Your Mortgage
The road to a mortgagee sale often seems like an unstoppable downward spiral. If you do not urgently seek financial assistance, you may find yourself unable to meet your obligations and lose your biggest investment yet.
Perhaps you’ve lost your job or had a relationship go south. Maybe it’s an illness that forced you out of work or the death of a breadwinner. Financial experts say that a debt spiral, which may lead to a mortgagee sale, is very likely. But it is preventable. The first step, keep up with your repayments and don’t default on your mortgage.
Below are tips to help you avoid defaulting on your mortgage.
Reduce the Mortgage Balance Fast
Since you are well-able to meet your mortgage payment obligations, don’t settle for a mundane routine payment every month. You don’t know what the future holds. Strive to reduce that mortgage balance fast.
The average mortgage size for the first time Kiwi Homeowners is slightly over NZ $400,000. An extra NZ $100 each week on your mortgage payment may seem like a drop in the ocean. But, when you pay it more often, it goes a long way in reducing your balance. You can reduce your mortgage balance by:
- Diverting any extra earnings towards your mortgage payments.
- Maintaining the same payment levels even if the rates dip.
- Increasing your repayment frequency, say from monthly to weekly or every fortnight.
- Reviewing the structure of the loan, say to a revolving credit mortgage, and boost repayments.
Maintain a 3-month Mortgage Repayment Fund
Job losses, illnesses, death and break-ups always seem to catch us off-guard. But you can plan for that rainy day. Try and build up a 3-month mortgage repayment fund to help you create a time buffer that will help you absorb the shock and get your thinking cap again.
If you’re struggling to plan your finances, you can get help with budgeting.
An income loss is a huge emotional blow. It would be more devastating if you are served with a PLA Notice and put on the mortgagee sales list shortly after.
So, guard yourself against the worst.
Don’t Hesitate to Inform the Lender
Don’t wait until it is past the payment date of your monthly mortgage bill. The first default could be the stumbling block that leads to a mortgagee sale. Instead, inform the bank or lender about the financial dip as soon as possible. Let the lender know the circumstances that led to it and:
- Why you cannot meet your mortgage payment obligations.
- You are willing to continue making payments.
- What you can afford for now.
- Ask for help either as a payment break or by restructuring your mortgage.
There are many ways the bank or lender can come to your aid. Plus, if you take up this step before you fall into arrears, the bank or lender is obliged to work out a solution with you.
These tips will go a long way in keeping you from defaulting in your mortgage and the prospects of a mortgagee sale at bay.