What happens if I can’t pay my mortgage?
Can’t pay your mortgage? It’s generally a good idea to discuss the circumstance with your lender or bank in the first instance. Lenders or banks may be able to consider the situation and potentially offer a payment plan or the situation temporarily.
For example, one bank’s website mentions that “If you’re going through a rough patch and having trouble making your home loan repayments, talk to us [the bank] about how we may be able to help”. The bank could help you restructure repayments, convert it to interest only, or even reduce your repayments. These can provide short or mid term relief, depending on the circumstances.
However the reality is that sometimes this can only be a temporary solution. If over some time, you cannot continue to meet the payments, the situation can get much worse. There is only so far a bank or lender can go to assist you. There are situations that can be tough, for example this is common for example where:
- A person has lost their job, and can no longer meet their repayments. E.g. a person has been made redundant, been fired, incurred a disability, etc
- A person has experienced a major sickness, health issue, or incurred a disability
- There has been a death
- Something has gone wrong with their business or income source
- There has been a divorce or separation
And so on.
Get legal advice about stopping the mortgagee sale
Whilst it is important to communicate with your bank or lender, there can be a point in time where it gets beyond them as something that they can solve. Owning a house and having a mortgage is a serious situation, the debt doesn’t just “go away” if something goes wrong. It isn’t as simple as renting.
If you are in default of your mortgage, the matter can be referred to the bank or lender’s legal team, collections team, or lawyers. This is a process that could mean that bank staff can no longer answer your questions about the matter, and ‘lawyer to lawyer’ communication may be required.
Therefore having a good lawyer and advising you in the process, can be a good idea.
Don’t ignore the situation or bury your head in the sand
Sometimes it can feel that ignoring the situation, or choosing to do nothing, might make the matter go away. This is probably not a good idea.
Why? Because the situation can often get worse. You can be charged penalties, legal costs, recovery costs, extra interest (e.g. ‘default interest’), and the matter gets more expensive and complicated to solve.
Also if the matter gets worse, a PLA (Property Law Act) notice can be issued. This can make the issue much harder or impossible to control.
It is dangerous to assume that nothing can be done to you
Sometimes people assume that they are protected by consumer laws and the good nature of business in the Western world, and “nothing can happen”. This is untrue.
Or you might assume that because you’ve been a loyal customer of a particular bank for 20 years, they won’t mind and will leave you alone. This is also, probably, untrue.
Failing to pay your mortgage or loan is a serious matter. It is unlikely that thinking that complaining to the newspaper, your local MP, or the prime minister; is going to help fix the matter.
A mortgage is a serious commitment and it is generally speaking, likely that the bank or lender has a strong legal position.
There are a lot of properties that have been lost because people did not pay the mortgage.
Consider selling the property
It might be an idea to consider selling the property yourself, especially if the situation is likely to get worse. If you are in the position to move in with family, or perhaps rent for a while, this can be a solution. It can give you that all important time needed to regroup and improve your finances.
Furthermore it might also mean that your credit position can settle and improve. You can then buy another house in the future once your circumstances improve again.
This can also make sense as you could potentially achieve a better sale price from your home by marketing it and selling it, such as using a real estate agent and a proper marketing campaign. As opposed to the bank selling it at a rushed and distressed mortgagee sale.
Speak to a financial adviser or Mortgage Rescue
You can also chat to Mortgage Rescue about your situation, and find out what options there are. This could mean that you can keep your house, or restructure the arrangements in some way.
For example, you may be able to restructure your mortgage and get urgent help, which will be of great help.
Avoid damaging your credit rating
Holding on to your mortgage in its current state, while the situation gets worse, is like holding on to a sinking ship. Sometimes you do need to pick the right time to escape.
If you don’t, your credit rating or credit report can get much worse. This means that in the future, if you try and get a loan for another house, or even a car loan or a credit card, the situation might prove to be harder.
If you’d like to get a copy of your credit file, you can peruse the website called My Credit File.
Consider changing to another home loan lender
If possible, another lender might be able to offer you better financial relief for your situation. They might be able to offer you an aspect of a mortgage that makes more sense, and will allow you to continue to have the house, while giving you more time and an opportunity to regroup your finances.
You can speak to us at Mortgage Rescue on our contact us page to see if this might be a sensible option for yourself.
Get urgent help
Remember, if you can’t pay your home loan, it’s important to talk to suitably qualified professionals and get help and advice to help you through this process.
Often your mortgage can be hundreds of thousands of dollars, and it is not easy to solve on your own. There are legal complexities, deadlines, and other serious consequences. There are also timeframes and deadlines that if they are not met, the situation can get much worse
The right help at the right time can mean the difference of being able to survive the situation, or potentially lose everything – and maybe even end in bankruptcy.