What Happens if I Can’t Pay Your Mortgage?

Taking a mortgage is a big financial move, but it’s also exciting and a dream every Kiwi craves to achieve. All the flashy ads on websites and other media, plus conveniently placed home loan payment calculators may make it seem like an easy journey.

Contents hide
1 Missing a Mortgage Payment Isn’t Like Defaulting on Rent
2 Lender’s Will Requests You to Regularize Your Mortgage Payments
3 The Lender Will Issue a Letter of Demand
4 The Lender Issues a Notice Under the Property Law Act (2007)

 

But the reality of making consistent payments every month or fortnight for decades is not as easy as it’s often portrayed.

Everyone goes through some financial turbulence in life. What if you can’t pay your mortgage?

Will the lender mortgagee sale your home?

Here’s more about what happens if you can’t pay your mortgage.

 

Missing a Mortgage Payment Isn’t Like Defaulting on Rent

Not to downplay how important it is to stay up-to-date with your rent payments, but the repercussions of missing a rent payment are not as dire as would be defaulting on your mortgage payments.

Each time you’re late on the mortgage payments, you are flagged as a likely defaulter. A missed mortgage payment also severely impacts your credit score and limits your access to other forms of credit.

The lender will call you and request that you normalize the loan within the shortest time. However, if you are not responsive, the lender will take debt recovery measures and eventually mortgagee sale your home.

Sounds like a grim future?

Read on and find out what each of these steps entails and how you can avoid a catastrophe.

 

Lender’s Will Requests You to Regularize Your Mortgage Payments 

Missing a single mortgage payment will not trigger the debt recovery process. Lenders don’t like it. So they try to amicably restore your loan or settle it differently. The lender will most likely reach out to you and request you to prepare a statement of position. A good mortgage broker can help you with this and help you when talking with the lender.

During the discussions, the lender will seek full payment of all arrears and that you continue to make payments.

However, if it’s clear from the statement that you are experiencing an income dip due to hardships, you can make a hardship application to your bank. Each lender has a unique way of handling such an application. The process at ANZ is not the same as HSBC, Westpac or at Kiwi Bank.

A hardship application only applies when your loan is not in arrears. But in this case, you may have missed a couple of payments. It is essential that you urgently seek financial assistance and remain responsive to the lender to save your home from going to a mortgagee sale. A trusted mortgage broker is an excellent person to have by your side.

 

The Lender Will Issue a Letter of Demand

If for any reason you fail to agree to missed mortgage payments, the lender will issue a letter of demand. The letter will outline the value of missed payments, fees, and penalties as well as any amounts required to make the mortgage regular. This is also the first step in formal debt recovery.

It’s a good idea to reach out to a good lawyer and mortgage broker at this point who can help you with a mortgagee sale.

 

The Lender Issues a Notice Under the Property Law Act (2007)

Lastly, if you are still stuck with the same lender and can’t find financial assistance to take care of the missed mortgage payments, the lender can serve you with a Notice under the Property Law Act (2007) and trigger the mortgagee sales process.

You need to urgently stop the mortgagee sale process. Fortunately, you still have the option of looking for emergency refinance.

A mortgage broker for bad credit can help save your home from going to a mortgagee sale.

ABOUT THE AUTHOR

Mortgage Rescue Information
Disclaimer

This website/media/content (“content”) may not be an accurate representation of what actually may/may not happen in a situation. It is not necessarily the actions you should or should not take. Furthermore, it is not necessarily accurate. You should normally seek highly qualified personal advice specific to your circumstances, which this is not. This content is provided as a general guide and is not personalised advice. Furthermore, is not intended as personal financial advice, nor is it specific advice to your situation. The author has produced this in good faith and disclaims any liability from any action or inaction from how you may use this content or the results it may or may not achieve. Government, bank, company, insurer, lending policies, as well as other policies, procedures, laws, legal procedures, and information in this content are likely to also change from time to time, and/or may not be accurate for any reason. Rules, procedures and decisions and policies may be applied differently and/or on a case-by-case basis and/or not in the manner described in this content. The information may also change from the approximate time this was written. You are strongly encouraged to recheck if all information is accurate and up to date. By reading and using this content, you agree to hold the author, associated entities and/or associates, harmless.