Experiencing Mortgage Hardship?

Given the recent downwards movement in interest rates, many borrowers have been fully focused on paying down their mortgages as fast as possible to give themselves an equity buffer in case something goes wrong.

However if you have recently lost your job, experienced a business downturn, or a period of unforeseen illness there is something that you can do to protect you and your family from loosing your home or going bankrupt.

Speak to Your Lender

The first step to take, before you actually fall behind with mortgage repayments would be to give your lender a call and explain the situation. Lenders have a legal obligation to offer repayment concessions in the short term, to borrowers experiencing financial hardship. You can request a temporary repayment holiday or a temporary repyment reduction to assist you with meeting repayment obligations. It is critical to ensure that all renogotited terms are confirmed by the lender in writing so that missed repayments or repayment defaults do not appear on your credit report.

If you took out your mortgage after July 1 2010, and you borrowed $500,000 or less, your lender will be obliged to consider your application for a hardship variation.

If you took out your loan beforeĀ  July 1 2010 and you borrowed up to the threshold amount current at the time of your loan, your lender will also be obliged to consider your application for a hardship variation.

Mortgage Relief Scheme

Victorian borrowers may qualify for the Mortgage Relief Scheme.

This scheme was set up by government and provides short-term relief for eligible applicants. If your original mortgage was for below $375,300, you may be eligible to apply for an interest-free Mortgage Relief Scheme loan from the Victorian Government. These loans help people experiencing financial difficulty maintaining set mortgage payments.

Mortgage Protection Insurance

Many of you my have included Mortgage Protection insurance as part of your loan application. Do confirm with your broker/lender whether you have mortgage protection insurance. If you do, your mortgage repyments will be maintained for some time if you are unable to work or loose a job. Some people do not remember if you ever took up this insurance.

Early Superannuation Access

Individuals who are at risk of loosing their home may also qualify for early release of superannuation to assist with mortgage repayments. This can take some time to get through for approval.

Warning here is that unless your hardship is temporary, you are at risk of running down your superannuation balance and then still loosing your home. It is important to understand before taking this step, as to what you are relying on once the superannuation funds released will run out.

Rent out rooms in your home

If your income has temporarily dropped you may be able to rent out some of the rooms in your house to assist with mortgage repayments.

Sell the home to prevent repossession

If you can not see any way of returning to your original financial circumstances, it may make the most sense for yout to sell and downsize. If you do nothing, you risk a mortgagee sale which generally costs a lot of money and leaves the borrower with nothing.



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