What to do if you can’t pay your mortgage | Updated: 5:31:37 PM, Friday December 14, 2012
By Alex Wilson
When the bills pile up and the mortgage is looking overwhelming there are practical things you can do to get back control. But taking the first step is always the most important.
Image: © Brian Jackson – Fotolia.com
BigPond Money deals
Finding yourself in a position where you are unable to pay your bills or meet your repayments can be extremely crippling and stressful. It can quickly turn into a situation of feeling helpless which can have a knock on effect to causing many other things to go wrong. Most of this comes from not knowing who to turn to for help.
Unfortunately most people overcome with stress and anxiety will stick their head in the sand and pretend that everything is going to be fine. What then occurs is a quick out of control spiral of increasingly more debt and more trouble. If you do find that you have gotten into a sticky situation with your finances the most important first step is to act quickly.
Taking steps to resolve the problem from the outset will help you regain control over your debts (obvious isn’t it).
What to do
Once you have established what bills are outstanding and what loans you are struggling to repay, contact your credit provider. Banks and credit providers have procedures in place to help customers who are experiencing financial hardship. They may look at things such as halting repayments for a period of time, or working out a repayment plan that you can meet over an agreed period.
If you have not had success with negotiating a deal with the credit provider you do have the option of seeking a hardship variation. Under Australian consumer credit legislation, you can apply for a hardship variation when you are struggling to make repayments on a credit card, personal loan, car loan or home loan due to unemployment, illness or another reasonable change in circumstances.
The credit provider has 21 days from your application to provide you with a written response. There are usually three types of outcomes that could come from these negotiations. The loan may be extended which reduces the repayment amounts. For example your 15 year home loan may be extended to a 30 year loan. Another option is for the repayments to be postponed, and the third option incorporates both of the first two.
Going down this route does have a disadvantage in that you will have to pay more overall in interest payments. Despite this it does create a short term advantage to be able to meet your repayments. Negotiating a deal early on will also usually mean that your credit rating will not be negatively impacted.
If you are rejected or unhappy with your hardship variation
If your claim for hardship variation is rejected or you are unhappy with the outcome you can complain to one of the independent financial ombudsman such as the Financial Ombudsman Service and the Credit Ombudsman Service.
Some people may also look at refinancing options available for their loan. There are many things to consider before doing this including the extra fees and charges and whether or not you can afford the repayment structures of the new loan.
Also try an avoid going into more debt to cover bills and repayments. Again this will only add to your burgeoning debt pile, making it more difficult to resolve your financial difficulties in the long term.
If you have not had success with your credit provider and the ombudsman service you may need to look at selling your property. You want to be in control of this, because if the bank goes down a foreclosure route they are going to look at a quick fire sale to reclaim their money owed, thus you could be losing out on the sale price. So seek financial advice as to how to handle this quickly and efficiently while maximising your sale price.
You may also require counselling and financial advice to get through this tough period. This can be an expensive endeavour but there are free services available from some government agencies and community organisations. www.financialcounsellingaustralia.org has a listing of available counselling services whilst www.nla.aust.net.au will help you find the legal aid services in each state.
If you do find yourself in a situation where you cannot meet your repayments it is important to act quickly in response. Talk to your credit provider who can give you details about your first steps you can take. Most importantly stay positive and take action today.
For regular updates, Like BigPond Money on Facebook.
- Refinance, compare home loans
- Doomsday preppers
- Buying from the US to save money
- Petrol price rip off, how the price of petrol is made
- One shopping basket, four supermarkets, who wins?
- Daily tips for saving money – from little things big things grow
- The secret weapon of the big supermarkets
- Ways to earn extra cash
- How best to manage tradies
- 5 ways to pay off your mortgage faster
Alex Wilson is the founder and editor of Savings Guide, Australia’s number one saving money website. For regular money saving tips, visit Savings Guide or follow Savings Guide on Facebook. Share this article |
Leave a comment
Follow this conversation Name: E-mail: Your URL: Comments: Follow any further comments to this article. All comments are moderated. Enter security code:
Follow this conversation
Leave a comment Your e-mail: You will be emailed when any additional comments are approved by the moderator. You are only subscribing
to comments made to this article. You may unsubscribe via the link provided on notification emails.
Related guides and tools
Daunted by the prospect of hiring some help around the house? We look at how to best …
To fix or not to fix? That is indeed the ultimate home loan question. But it’s a …
The end of the Mayan calendar is nigh and many are clearly already prepared. We look at …
Asking your wedding guests for money as a present was once socially unacceptable. To …
ATO increasing penalty units Borrowing till your nose bleeds Club memberships how much you pay When is a sale not a sale? Credit card stress What type of home loan is right for you? Offset and redraw vs savings
Find a better home loan Compare home loans Unsure about life insurance? Compare life insurance Stash your cash Compare term deposits Go
Sign up to receive the latest finance news. Email: Subscribe
Connect with us on: Facebook Twitter LinkedIn Google+
BigPond on Facebook
Tools & calculators
Try our budget calculator to see where all the money goes.
- Home loan borrowing calculator
- Credit card debt repayment calculator
- Credit card health check
- Home loan repayments calculator
- More tools and calculators »
Currency converter »
Convert: From: To:
Convert Amount: Data supplied by Morningstar, based on a 30min delay.