If you have a mortgage secured by your home or an investment property, then falling behind in mortgage repayments without advising the lender of your financial hardship, and renegotiation your current loan repayments, may result in your property being repossessed. While the lender’s rights to repossess a property differ for investment properties as compared to a property you actually live in (ie. your home loan), ultimately either can be repossessed if you fall into arrears with your mortgage.
What does it take for a lender to repossess?
- you have missed a mortgage repayment and have therefore fallen into a default;
- the lender has notified you that youare in default of your mortgage and have sent you some written communication of this matter;
- after receiving the default notice you take no action and miss a second monthly mortgage repayment.
Ask for a Hardship Variation
The first step to be aken is to advise your lender of your financial hardship and ask for a hardship variation to your mortgage. While calling the lender over the phone, is reasonable, make sure that all important communication is also in writing so that you are able to provide proof of your communication re the hardship with the lender to a third party if necessary.
What is a Hardship Variation?
This is where you may be able to qualify for a repayment holiday over a few months or repayment reduction for some time to help you hold on to your mortgage and property.
Can the Lender Decline?
This would be highly irregular as all lenders are required by legislation to offer special consideration to individuals experiencing financial hardship. One situation when this may differ would be where your financial circumstances have changed permanently and you can no longer afford you mortgage.
Try Selling/Renting Out the Property Yourself
If you can not reach agreement with your lender because a hardship variation is only postponing the “inevitable” you may decide to rent out the property and move yourself to more modest accomodation. In doing so it may be easier to afford mortgage repayments.
Alternatively if you do need to sell, you will be far better off to sell yourself before repossession takes place. Home owners with equity in their property stand to loose a lot more money if the house is repossessed and sold from a mortgagee auction. Mortgagee auctions attract significant costs from the lender and are best avoided.
What if a Lender Proceeds to Repossession
Any lender that decides to repossess will need to issue legal proceedings and go to court to effect repossession. Once this occurs, you as the property owner loose the ability to sell the property or live in it. If any funds remain after the lender sells your property and covers all of their costs, you will be entitled to these. All too ofter lenders of repossessed properties move slowly while continuing to charge you default rate on your mortgage. Unfortunately once all is said and done, little if any is likely to remain for you….