April 7, 2011
If you are a few months behind on your mortgage repayments and facing a default notice, you are not alone.
This month, credit ratings agency Fitch revealed that mortgage defaults had grown at a surprising rate, up 12.5 percent in the December quarter, compared with the same period the previous year.
Stressed-out borrowers are being urged to immediately contact your lender, rather than waiting until it’s too late.
You’ll likely find there is often a really easy fix to mortgage stress, such as looking to go interest-free for a while to reduce the repayment or consolidating other loans.
Many credit providers will try to help if you can’t make repayments because of illness, unemployment or other financial difficulties.
How to get out of trouble
If you are struggling to keep up with repayments then the government’s Money Smart website recommends that you take the following steps to decrease stress:
- Prioritise your debts.
- Talk to your credit provider.
- Apply for a hardship variation.
- Deal with utility bills.
- And compare mortgages online and look to refinance.</ul>
If you are having trouble managing several debts – such as a home loan and multiple credit cards – you could take one of two options.
Continue making minimum payments on all cards and either aim to clear the card with the smallest debt first, or the card with the highest interest rate first, and then keep working your way through your cards.
Work on paying off your mortgage as the priority, because that is your most important loan. If you come to a new agreement with your lender, only make repayment arrangements that you can afford.
If you can’t come to an agreement and you think the lender’s decision is unfair, ask your lender to review its decision, and if you’re still unhappy with the outcome you can apply for a hardship variation.
This is a formal process where you ask your lender to vary the terms of your loan contract to allow you to postpone your repayments, make interest-only repayments for a period, or extend your loan period.
At this point you may also be struggling with utility bills and most utility providers also have hardship officers who can work out a plan so you can make payments in instalments. Don’t use your credit card to pay off your utility bills as this will only add to your debt.
Finally, the worst thing you can do if you’re drowning in debt is nothing, and the longer you leave the problem, the harder it will be to sort things out.
It can also help to use financial comparison websites like RateCity and make sure you have the best mortgage for you, because if not it might be time to consider refinancing.
Related mortgage links