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June 9, 2015What to Consider with a Home Loan in Default
Introduction
Facing a defaulted home loan is one of the most stressful and challenging situations a homeowner can experience. Often, defaults result from significant life events, such as divorce, job loss, illness, business failure, or death. Additionally, accumulating debts from credit cards and personal loans can contribute to mortgage arrears. This article provides insights on how to manage a home loan in default and navigate mortgage arrears effectively.
Causes of Home Loan Defaults
Home loan defaults typically result from a major life event. Common triggers include:
- Divorce: The financial strain of a divorce can make it difficult to keep up with mortgage payments.
- Job Loss or Reduced Income: Losing a job or experiencing a significant reduction in income can quickly lead to arrears.
- Illness: Medical expenses and reduced earning capacity due to illness can impact your ability to pay your mortgage.
- Failed Business: Business owners who experience a downturn or failure may struggle to meet their financial obligations.
- Death: The loss of a breadwinner can leave surviving family members unable to maintain mortgage payments.
Mortgage Companies' Approach
The good news is that mortgage companies focus on providing loans, not on taking properties from those in financial hardship. They will typically work with borrowers who have mortgage arrears to help them get back on track. Understanding what is important when your home loan is in default can help you start working towards a solution. If you need assistance, speaking to a broker who specializes in helping people in similar situations can be beneficial.
Assessing the Situation: How Long Have You Been in Default?
The first step is to understand the extent of your default. Determine how long your mortgage has been in arrears. Lenders may only allow a mortgage default to last for a few months before proceeding with foreclosure. While foreclosure is not their priority, it is their right. The longer you are in default, the more urgent the action becomes. The sooner you seek advice or contact your bank, the better.
Costs of Resolving a Home Loan Default
To clear a mortgage default, you will typically need to pay all missed amounts. Some companies are willing to work with you to spread the payments over an agreed period. This may require a larger initial payment on arrears, followed by increased monthly payments to catch up. Although this adds to your financial burden, it provides a viable way to resolve the default if you have the means. Ask your lender for the exact amount owed, including legal costs and other expenses, to form a manageable payment plan.
Timeframe for Resolving a Home Loan Default
Once your home loan goes into default, time is critical. Most people have three to six months before legal action is taken to seize their property. Speak with your lender to determine how much time you have. For debts older than three months, your lender may require the full debt to be recalled, meaning you must pay your entire loan, not just the arrears. This is usually done by refinancing. Discuss your options with your lender to determine the best course of action.
Seeking Professional Help
If you feel overwhelmed, consider recruiting the services of a professional who works with home loans in default. They can help you negotiate a satisfactory settlement, whether it involves negotiating with your lender to retain your debt or refinancing with another company.
Contact Loansaver Network today at 1300 796 850 to see how we can provide you with professional home loan default help.
Key Considerations for Managing Home Loan Defaults
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Act Quickly:
- The sooner you seek help, the better your chances of finding a solution. Contact your lender as soon as you realize you are falling behind on payments.
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Understand the Costs:
- To clear a mortgage default, you will typically need to pay all missed amounts. Work with your lender to understand the total amount owed, including any legal costs and other expenses.
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Explore Refinancing Options:
- Refinancing your mortgage can be a viable solution. A debt consolidation loan can help manage multiple debts and simplify repayments.
- Seek Professional Help:
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- Working with a professional who understands home loan defaults and mortgage arrears can make a significant difference. They can negotiate with lenders and find the best solution for your situation.
Conclusion
Dealing with a defaulted home loan is challenging, but it is possible to find a solution with the right help and timely action. By understanding your situation, knowing the costs, and exploring refinancing options, you can navigate mortgage arrears effectively. If you are facing similar issues, do not hesitate to seek help and explore your options.
For more information on managing mortgage arrears and finding solutions for defaulted home loans, visit our Mortgage Arrears page or contact us at 1300 796 850.