Circumstances beyond your control may be causing you now to stress over making home loan repayments. Act now to help you avoid foreclosure.

If you have lost your job or been sick and missed work, or been injured, you may be struggling to make repayments on your mortgage. There are a number of things that you need to consider and actions you need to take to ensure that you are able to maintain the roof over your head. Looking at your situation sooner rather than later will help you avoid defaulting and lead you to have a better overall outcome, and a reduction in personal stress.

The first thing upon having had a situation like being laid off from your job or being injured or sick is to be aware of your finances coming in, and how much you are currently having being spent on outgoings. With finances coming into the household – are you able to access alternative sources of income such as sickness payment, unemployment benefits or disability payments – whether short or long term. Go through your paperwork and see if you have previously obtained insurance to cover things such as unemployment or disability to pay your mortgage payments while you are in this situation.

Once you are aware of what payments are available to support your income, it is important to establish a budget as to how much you can afford to spend on your essentials, and how much you can afford to repay on your loan. As a general rule, you should be not spending any more than 50 – 60% of your income on your mortgage repayments.

You may need assistance from a welfare organization, social security advisor, a social worker, or a financial counselor to help you organize your finances so that you can cover your essential living expenses. They can provide you with information where you can access social security payments, food assistance, medical assistance, or mortgage assistance.

Professionals such as financial counselors can help you negotiate with your lenders to vary your payments or set aside your payments temporarily, depending on what your mortgage contract is or what your legal rights are. They can help you go through the fine print in your mortgage contract, and are aware of all of the rights that you have in your particular jurisdiction.

You can be entitled in Australia to apply for a hardship variation – where you are able to vary the terms of your mortgage repayments – because you are in a situation where unforeseen circumstances occurred.

In the U.S. there is the Obama administration’s Making Home Affordable assistance scheme, and in the U.K. there is the Mortgage Rescue Scheme and in Canada information is available at Take Charge of Your Debt.

Once you are aware of your rights, you have a budget in place, have secured an income and have knowledge of whether or not you can afford to make any repayments and how much they are, you can call your lender to make vary the terms of your mortgage contract. If your lender has a hardship team, be sure to speak directly to them.

This can include reduced payments for a specified period of time while you either look for a job or recover, or setting aside of repayments and having the term of your loan extended. You may be also able to ask for any interest on any default amounts be set aside or reduced while you are negotiating the terms of your mortgage. This will depend on the lender, your contract, and your legal rights.

If you need to, enlist the help of the person you went to initially for help and information to help you negotiate the terms of your mortgage – your lender may see that you have been proactive in getting help rather than procrastinating – and lenders generally appreciate you being proactive in getting help rather than defaulting and doing nothing.

If your lender refuses to negotiate with you, you will need to go back and ask to get legal help for yourself. Getting legal help may be able to help you put a temporary hold against legal proceedings by the lender to attempt foreclosure.

Legal help will direct you to your rights, and advise you best in your decisions as to where to proceed. Legal information can help you decide if you wish to keep your home, whether that is possible, to try to refinance it, or to be able extend the time available for you to secure another place to dwell because of being forced out of your home due to foreclosure.

If you have had an unforeseeable circumstance that has caused you financial hardship and difficulty in making your mortgage repayments it is essential to act sooner rather than later in knowing your rights. Mortgage contracts are drawn up with time constraints on due dates for payments, timing for issuing of notices and when legal proceedings by the lender can occur for them to repossess a property. It is important therefore to secure an income, get help, information and support from legal sources, and possibly also from a financial counselor. Following these steps will help secure the roof over your head, and maintain your credit rating during times of financial hardship.

Reference:

Consumer Credit Legal Centre and Legal Aid NSW, (2011) The Mortgage Stress Handbook, NSW: Publications – Legal Aid


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