Life does not always go according to plan. Sometimes unexpected obstacles like bills, sickness, loss of a job or business make it difficult to keep on top of mortgage repayments. People in this position need to know how best to deal with it as taking action at the right time can result in a much better outcome.
Firstly don’t be ashamed or afraid to seek help. This is a situation that many people face at some stage in their life and you will find that in general people (even the banks!) are sympathetic if you take action early.
I have come across far to many clients who face this problem and do nothing about it until its too late. They may not have the money to make a mortgage repayment so they miss it and their mortgage goes into arrears. Most people have the best of intentions and may even have plans in place and hope that they will be able to come up with the funds at some stage, get a job soon or sell the house etc. Whatever your situation the best advice is to take action before your mortgage is in default.
What to do if you can’t make a mortgage repayment
You will find that if you approach the bank before you default on your mortgage they are usually willing to work with you, they may agree to a mortgage holiday giving you time to get back on your feet or give you time to market and sell your property. If you are suffering from severe financial hardship you may even be able to withdraw your KiwiSaver funds to be used towards your mortgage repayments, click here to see the criteria. These arrangements take time so it is important to approach your bank as early as possible. Once your mortgage is in arrears you will find banks are not nearly as helpful or accommodating.
What to do if your mortgage is already in arrears?
Once you have missed mortgage repayments the situation can quickly spiral out of control, as now you have to make up the missed payments as well as keep on top of current ones. Again the best thing to do is talk to your lender and see if they can work out a repayment plan for the payments you have missed if you can’t come up the funds immediately. If you are 3 months in arrears you should expect a demand letter which will give you a time frame to pay whats owing plus interest and any costs incurred by the bank failing which a Property Law Act (PLA) notice will be served. This PLA notice will give details of the default and a time frame of not less than 4 weeks to rectify this and also explains what the lender is entitled to do if you are unable to come up with the money which in normal circumstances is to sell your property at mortgagee sale.
Mortgagee sale is not a situation you want to face. If it is clear that you will not be able to meet your mortgage obligations then it is best to get realistic and put your property on the market sooner rather than later. People often use the mortgage holiday as a grace period to get their property ready for sale. If you sell it yourself/though an agent you are likely to get a better price than you would at mortgagee sale. You may also be able to maintain your credit record and possibly downsize your mortgage to something more affordable.
If you would like more information the Banking Ombudsmun has a resources section on their website with a helpful guide on Mortgagee Sales – http://www.bankomb.org.nz
Contact us on 638 6969 if you have any questions related to mortgagee sale or other property transactions.