Finance

What to do when you can’t pay your mortgage

Let’s admit it. Homeownership is as painstakingly hard as the cost of living in Australia. Foreclosures are hitting record highs for the past couple of years, and the housing tale continues to unravel as economic stagnation and high unemployment tends to leave homeowners broke – causing them not to be able to pay their mortgage.

 

If you’re one of those who struggles to make your mortgage payments, here are some options to help you keep your beloved home, or at least limit any financial issue of giving it up.

Consult your lender. A lot of homeowners lose their homes to foreclosure out of pride and denial. Take note that ignoring foreclosure notice won’t make the problem go away, but it’ll just make your options slimmer. As soon as you begin having trouble with paying the mortgage, contact your lender immediately to see if you can work things out.

Perhaps you’re just looking at the wrong provider, variable rate home loans from Newcastle Permanent Building Society, for instance, offer lower interest than other providers in Australia. Consider refinancing now by contacting their customer support or consult first with an agent.

For lenders, assisting their borrowers with keeping the home can be a best-case scenario, especially at a time when the market is already being flooded with a lot of foreclosed properties.

Consider refinancing. As said above, refinancing your home is also a good option. With this, if you’re currently stuck on paying off your mortgage in 10 years, refinancing can help you extend the amortisation of your current loan, which can help making the payments smaller and thus, possible.

Keep in mind that refinancing will have fees due to discontinuing your current mortgage contract, and may sometimes cost you more in interest over time. If you’ve already overextended your loan, refinancing may not be an option at all.

Utilise loan modification. Loan modifications are used when a homeowner works with a lender in changing the terms of the current mortgage loan. This could mean a permanent or a temporary change to the mortgage, its term or monthly payment. This option works like refinancing, but it’s only open to those who are actually facing financial hardship, and those who are willing to work with a lender that is receiving similar requests.

Declare for a bankruptcy. Declaring for a bankruptcy will wreak havoc on your credit and will make it hard for you to borrow from anyone for a couple of years. Bankruptcy can make it possible for you to keep your home, but only if you have a solid plan to repay some of your debt. You are required to pay some of what you owe before you are quits with the lender.

Sell your house. One of the worst options out there, and one you wouldn’t like – and something that is only considered when all else fails. Sometimes the best way you can avoid a foreclosure is by selling your home. The best option is to do it the traditional way.

You can also do it through a short sale, where the bank agrees to let you sell the home for less than they owe on the mortgage. It’s up to the lender to decide whether to allow this. Short sell isn’t as damaging to your credit as a foreclosure.

There’s also the deed in lieu of foreclosure, where a lender will let a struggling homeowner sign their deed in favour of the bank instead of suffering a foreclosure.

These are the options you can use, but there are others, so keep searching. Keep at it and keep your home! Good luck!

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