How to Deal with Loan Defaults
If you fall behind on your mortgage payments, it is not the end of the world, but it does require you to take action, sooner rather than later. Sometimes there are challenges, but they can be dealt with through great communication.
In any situation, the first thing you have to do is to contact your lender. They can, in most instances help you more than you think. It may be a case of changing the term length of the loan or restructuring it to allow you to make payments easier.
When you find yourself in this situation, it is imperative that you act quickly, because behind the scenes, your lender will have procedures in place that they will already be looking at, and if the worst comes to the worst, they will, in fact, be seeking to repossess your home. So, get on it early. Don’t leave it, call them at the first sign of difficulty.
Things to Consider
Making a repayment arrangement with your lender – this is where you would speak to your lender and seek financial guidance to work out a new budget. This has to be realistic, and if you find that no matter what option is on the table you cannot afford it, you may have to consider selling your home as the only option.
Calling or writing to your lender – lenders have financial hardship teams in place. When you speak to these, record or keep copies of all conversations, you have. You can show these teams your repayment arrangement and ask if there is a possibility you can extend the term of your loan.
Statements of financial position – these documents allow your lender to see if you are capable of making your repayments instantly. This document, you should complete with the assistance of a financial counselor as you have to ensure that all of your necessary expenses are included to make the document realistic. If you get this wrong, it can be a case that your lender rejects your application.
Other Options Available
- Catching up with repayments.
- Changing the loan terms.
- Consider downsizing to a cheaper home.
- Interest only option.
If your repayments are affected due to illness or unemployment, check your insurance policy to see if you have these included. You could find that you are worrying about something that is covered for a period.
If your utility bills are the area that are causing you problems with making mortgage payments, you can speak to these institutions also, and they should be able to help in this situation. So, then, this could allow you to catch back up your mortgage payments or to ease the burden and not fall too far behind.