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Don’t Lose Your Home Due To Mortgage Arrears

Failing to meet home loan repayments could see you lose your house. Basically your lender has the right to sell your house if you fall behind in repayments; fail to make up the repayments within a specified time frame after receiving default notices; and don’t have a defence for doing so. According to statistics, it is the low-doc and non-conforming borrowers who are getting into trouble with their mortgage. Around 7 per cent of low-doc home loans in Australia are in arrears.

Steps To Take:

• As soon as you miss a repayment get legal advice and contact your lender about trying to work out a repayment schedule. This will be very helpful in preventing any defaults from being placed on your credit history.
   
• Under the Consumer Credit Code, if you’ve fallen on hard times due to illness, injury or job loss you might qualify for a hardship variation to your repayments.
   
• If adjustment to your set repayments is not an option, try to sell the house yourself rather than let it go at a mortgagee sale. This is only possible before your lender commences court action. Although banks are bound to try to get the best price possible for a house, the RBA says voluntary sales seem to fetch between 15 to 20 per cent more than mortgagee-in-possession sales.
   
• There are circumstances borrowers are allowed to access the funds in their superannuation to get their home loan back on track. The Australian Prudential Regulation Authority needs to approve the early release of superannuation. In 2006, APRA approved 13,781 applications for the early release of super due to financial stress resulting from either mortgage payments or medical expenses. Be careful. This is only an option if your financial difficulties are short- term. If they are ongoing, you might still lose your house and have little superannuation to fall back on.
   
• You may be able to borrow some money from family or friends to help you in the short term while trying to get back on track.
   
• Depending on your insurance cover, some company policies include home loan repayments. This will only be possible with policies like income protection or mortgage protection insurance.
   
• Several state governments offer short term, interest free mortgage relief loans to cover temporary shortfalls. You must live in the property and the loans will only be granted if the value of the house and size of the mortgage are under certain thresholds.

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