RateCity
Mortgage Default
A mortgage default is typically when a borrower is 90 days or more behind in making a repayment on their home loan.
The fee charged for missing a mortgage repayment is not generally a lot of money for most borrowers. In mid-2011 the average arrears administration fee was around $34 in Australia, and around $19 for the major four banks. Fees range from about $9 up to around $195, depending on who you borrow with.
But given that mortgage defaults are on the rise, it's important for Australians to understand the implications of missing repayments.
That's because if you skip a mortgage repayment once each year over the life of your loan, you could be extending your mortgage by more than two years, which will cost borrowers significantly more in the long-term. For an average 25-year home loan of $300,000 and with a rate of 7 percent, you'll also be adding around $33,000 in interest and late fees.
Your financial alternatives
While missing one repayment may provide immediate reprieve to those under financial strain, there are a number of alternatives for those of you struggling to raise the funds for your monthly repayments.
If you do default on your mortgage you should try to double your repayment the following month.
Where possible, it's a good idea to protect yourself against future mortgage defaults by putting a little extra money aside in your budget each month in case of financial hardship down the track. For example, by accelerating your monthly repayments by just $50 per month on a $300,000 home loan, you'll have an extra $600 in a year to be used as payment reprieve.
If you can afford to keep doing so for the life of your loan, you could trim two years of the length of your loan and save around $24,000 in the process.
If you are struggling, then there are services out there to help, so don't be afraid to ask for assistance. One such service is run by the Australian Financial Counselling and Credit Reform Association, which can put you in touch with your local chapter in Australia.
The table below shows some of today's lowest fixed rate mortgages available at RateCity.com.au.
The fee charged for missing a mortgage repayment is not generally a lot of money for most borrowers. In mid-2011 the average arrears administration fee was around $34 in Australia, and around $19 for the major four banks. Fees range from about $9 up to around $195, depending on who you borrow with.
But given that mortgage defaults are on the rise, it's important for Australians to understand the implications of missing repayments.
That's because if you skip a mortgage repayment once each year over the life of your loan, you could be extending your mortgage by more than two years, which will cost borrowers significantly more in the long-term. For an average 25-year home loan of $300,000 and with a rate of 7 percent, you'll also be adding around $33,000 in interest and late fees.
Your financial alternatives
While missing one repayment may provide immediate reprieve to those under financial strain, there are a number of alternatives for those of you struggling to raise the funds for your monthly repayments.
- Contact your lender
- Make it up later
- Reassess your financial situation
- Ask for help
If you do default on your mortgage you should try to double your repayment the following month.
Where possible, it's a good idea to protect yourself against future mortgage defaults by putting a little extra money aside in your budget each month in case of financial hardship down the track. For example, by accelerating your monthly repayments by just $50 per month on a $300,000 home loan, you'll have an extra $600 in a year to be used as payment reprieve.
If you can afford to keep doing so for the life of your loan, you could trim two years of the length of your loan and save around $24,000 in the process.
If you are struggling, then there are services out there to help, so don't be afraid to ask for assistance. One such service is run by the Australian Financial Counselling and Credit Reform Association, which can put you in touch with your local chapter in Australia.
The table below shows some of today's lowest fixed rate mortgages available at RateCity.com.au.
