Owning a home is a significant accomplishment, but sometimes unexpected financial challenges can make it difficult to meet mortgage payments.
If you're struggling to pay your mortgage, it's vital you take proactive steps to address the issue and find a solution. No one wants to be in this situation, but all hope is not lost when you hit a rough patch. Here are some tips to help you if you cannot meet your repayments.
Communicate with your lender
The first and most important step is to communicate openly with your lender.
You want to contact them as soon as you anticipate or experience any financial challenges. Lenders are often willing to work with borrowers to find solutions that work for each other. It's essential to maintain regular communication with your lender and keep them informed about your situation.
Seek financial advice
Reach out to a financial adviser or budgeting service that specialises in mortgage arrears.
These professionals can help you assess your financial situation. Once they have an understanding, they can help you explore your options, and provide guidance on managing your mortgage. The Citizens Advice Bureau, MoneyTalks, or the New Zealand Federation of Family Budgeting Services can offer valuable advice and support.
Apply for government assistance
Consider Government programmes that are available. There could be options to assist homeowners who are struggling to make mortgage payments.
The Kainga Ora—Housing New Zealand Corporation provides various support for people in hardship. They have the Mortgage Repayment Assistance (MRA) programme, which is aimed at helping homeowners going through tough financial times. You do have to meet certain criteria to apply, so check their website or contact them directly for further information.
Explore loan modification
Discuss with your lender how you can make changes to you loan to work with your current situation. They may be willing to adjust your mortgage terms temporarily or permanently to make your payments more manageable. Loan modifications could include extending the loan term, reducing interest rates, or temporarily deferring payments.
Again, communication with your lender is important for exploring these possibilities.
Review your expenses and budget
Your budget might hold all of your answers, so take a close look at what you're spending and where. Then identify where you can potentially make cutbacks.
With a realistic budget that prioritises essentials and minimises unnecessary spending, this could set you on a path to meet your repayments. Utilise online tools and apps to help track and manage your finances effectively. By closely monitoring your spending habits, you may be able to find extra money to put towards your mortgage.
Explore temporary income options
A second job could provide temporary income to top up your current earnings. This could include taking on part-time work, freelancing, or offering services in your community. Additionally, you could qualify for government assistance that could provide temporary relief.
Investigate mortgage refinancing
With interest rates changing, you current mortgage terms might not work for you anymore. Refinancing and finding better terms with different lenders could be a better long term plan to meet your repayments. This could mean you replace your existing mortgage with a new one, often with better interest rates and terms. A mortgage broker or financial adviser would be able to help you consider all your refinancing options and if it's right for you.
Responding to a default notice
Your options get harder once you receive a default notice, so you want to do everything you can to avoid getting this letter. If you do receive a default notice, it means that you are significantly behind on your repayments. You don't want to waste time, you need to take immediate action to address this situation.
Here are some steps to consider:
Read and understand the notice
Carefully review the default notice and make sure you understand what it says. It should outline the amount in arrears and how long you have to repay your debt. It will also outline any actions your lender may take if the default is not remedied.
Contact your lender
Communication is key. You will want to reach out to your lender quickly after receiving the default notice. Be willing to discuss your financial situation and consider potential options for fix the arrears. They may be open to negotiating a repayment plan or other options to help you catch up on your payments.
Seek legal advice
This can be a stressful time, and it is likely you will feel overwhelmed and unsure about what to do next. If that's the case, getting legal advice from a qualified professional experienced in mortgage and property law would be wise. They can provide guidance specific to your situation, help you understand your rights and obligations, and ensure you understand any legal implications.
Provide necessary documentation
Prepare yourself to be open about your current financial situation. Your lender may request specific documents to assess your financial situation. Have pay slips, bank statements and any other documents proving your expenses ready to demonstrate your willingness to resolve the default. Open and transparent communication is essential during this process.
Negotiate a repayment plan
Work with your lender to create a repayment plan that works with your financial situation. This plan may involve spreading the arrears over an extended period, increasing your regular mortgage payments, or making lump sum payments. The lender may also consider extending the loan term or temporarily suspending interest charges.
Comply with the agreement
If you reach an agreement with your lender, make sure you meet those terms in the repayment plan. To avoid further complications, promptly make the agreed-upon payments. Continue to regularly communicate with your lender to keep them updated on your progress and address any unforeseen challenges before they come up.
Explore dispute resolution options
If you are working hard to find a solution, but you're finding it challenging to reach a resolution with your lender, then you have the option to use dispute resolution services. The Financial Services Complaints Limited (FSCL) and the Banking Ombudsman are organisations that can assist in resolving disputes between borrowers and lenders.
Get advice
Remember, every situation is unique. It's important to seek personalised advice and support when dealing with a default notice. Act quickly, communicate openly, and being proactive in your approach can help you navigate through this challenging period and find a suitable resolution.
This is going to be a stressful time in your life, however, remember, you are not alone.
There are resources and assistance available to help you navigate this challenging time. By communicating with your lender, seeking professional advice, exploring government programmes, and making necessary adjustments to your finances, you can find solutions. This will help address your mortgage arrears and work towards a more stable financial future.
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