Facing Mortgage Arrears or a Mortgagee Sale?

If you’re behind on payments or facing a mortgagee sale, we can help you understand your options and explore a private sale before the situation goes further — no pressure, no obligation.

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Avoiding a Mortgagee Sale the Smart Way

Falling behind on mortgage repayments can be stressful, but acting early can give you more options. If your financial circumstances have changed, the first step is to understand your position, communicate with your lender and consider what solutions may be available. If keeping the property is no longer realistic, selling before a mortgagee sale may give you more control over the process.

What is a mortgage?

A mortgage is a loan secured against your property. You agree to make regular repayments to the lender over an agreed period, including interest. If repayments are missed and arrears continue to build, the lender may eventually take steps to recover the debt, which can include a mortgagee sale. Understanding your mortgage, what you owe and any arrears is an important first step when considering your options.

Mortgage example

Residential properties are expensive and when a potential homeowner approaches a financial institution for financing, they require some form of commitment. The typical purchase plan using a mortgage requires that the homeowner contributes 20% of the value of the property and the other amount is offered as a loan. Since the bank must charge the loan, there is an interest amount accrued over the period of time that the loan will be active. Regular installments made to service the loan are meant to reduce the principal amount as well as cover the interest earned over time. Some homeowners prefer to pay installment that would be equivalent to the cost of rent they would pay if they were letting the property while some pay higher amounts to reduce the repayment period.

Repayment of a mortgage loan

It is the responsibility of the home owner to make sure that their monthly installment reaches the bank as promised. Once you enter into a mortgage arrangement, you do not have the luxury of falling sick or being without an income generating activity. When you default on a loan installment, you will receive notification from the bank within a few days, so you can be sure that they keep track of all payments due to them. While it is important to maintain your end of the agreement by making payments as you should, life is unpredictable and bad things are bound to happen all the time.

The Banks

Banks take it very seriously if you are late on a loan installment, or you do not have enough money to settle one. The consequences of failing to honor loan repayment could be as serious as losing the house or getting a bad credit report. This is why it is important to keep paying back the loan by whatever means. The general misconception that people have when they are unable to pay for one reason or the other is that banks do not listen. There are many reasons why a loan installment may be late but the bank will not be aware of it if the homeowner does not present their case to them. Did you know that people have managed to keep their houses bought using mortgage finance and maintained a good credit report even without money to service a loan? The secret lies in the management of the financial situation. No one knows your financial situation better than yourself so it is easy to determine if you will be able to maintain payments or not. Here is how to approach the situation if you ever find yourself stuck;

Communicate

Does it sound embarrassing to inform your bank that you are broke? The good news is that banks deal with cases of loan default all the time so it will not be a strange occurrence to them. The best time to communicate to the bank that you are not in a financial position to hold up on your payments is before you default. If you do not tell them yourself, they will still find out and then you will not have control of how they handle your case. When you approach the bank to inform them of your situation, mention to them the intention to defer monthly installments for a few months. There is no break to loan repayment so the best way to approach the bank is to express intention to pay but at a later date.

Resume Your Repayments

If you have fallen behind on your mortgage, getting repayments back on track as early as possible can help prevent the situation from becoming more serious. Speak with your lender about what you can realistically afford and whether any repayment or hardship options may be available. If your financial position has improved, consider using some of the additional cash flow to reduce outstanding arrears.

Steps to Avoid a Mortgagee Sale

Mortgage arrears can become more difficult to resolve the longer they are left. The earlier you understand your financial position and speak with your lender, the more options you may have. There is no single solution for every homeowner, but the steps below can help you assess the situation and decide what to do next.

Contact Your Lender Early

If you think you may miss a payment, speak with your lender as early as possible. It is usually easier to discuss possible solutions before arrears become more serious.

Understand Your Financial Position

Review what you owe, any arrears, your regular income and essential expenses. Having a clear picture of the numbers will help you understand which options may be realistic.

Explore Repayment or Hardship Options

Depending on your circumstances and lender, there may be options to adjust repayments or deal with temporary financial hardship. Consider getting independent financial or legal advice before making a decision.

Consider Selling Before a Mortgagee Sale

If keeping the property is no longer realistic, selling voluntarily before a mortgagee sale may give you more control over the timing and sale process. We can discuss whether a private sale may be an option, with no pressure or obligation.

Every situation is different. We’ll give you a straightforward assessment without pressuring you toward a particular decision.

Factor in all your expenses

When reviewing whether you can continue to afford the property, look beyond the mortgage payment alone. Rates, insurance, repairs, maintenance and other household costs can all affect your cash flow. A realistic budget will help you understand whether keeping the property is sustainable or whether another option, including selling, should be considered.

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