Making sure you can keep up with mortgage repayments is vital to your financial security. Your property is likely to be the most valuable thing you own, so it is important not to jeopardise it by defaulting on your home loan.
Keeping your credit report clear of discrepancies is important, and you can help make sure you do this by setting clear financial goals.
However, sometimes people run into financial difficulties resulting in blemishes on their Equifax credit reports. This doesn't mean that you will certainly lose your house, though. If you have a bad debt or your monthly income has altered in some way, you might not be able to pay your utilities bill on time, for example. Keeping your credit report clear of discrepancies is important, and you can help to do this by setting clear financial goals, and reacting quickly when you realise you're struggling to keep your head above the waves of bills and payments.
Situation 1: Mortgage repayments are taking away from other bill payments
Plenty of other bills come with owning a home, like rates and electricity bills, for example.
If you start falling behind on these bills, it could lead to defaults being added to your credit report, which could make it harder for you to obtain credit in the future. To help avoid this situation, review your budget often (monthly or quarterly at a minimum) and update it whenever your regular payments change1. Changing power or internet providers could be a solution to saving money to help make repayments and keep your credit report clear and save your home loan.
Your lender wants to work with you to keep your home loan on track, so be open with them.
Situation 2: You missed a mortgage payment
Missing a mortgage payment frightens some people - don't be afraid! You could have missed your deadline for any number of reasons, but if you do, it's important that you contact your home loan provider as soon as possible. Tell them why you missed the payment and discuss a way that you can catch up without crippling yourself financially2. They can help you come up with a suitable solution so that you can keep your house, you don't default on the home loan, and you don't have to pay through the nose at your next payment date.
You want to work with your lender, and they can help with a solution that works for you.
You might be struggling with something in the short term, and your lender can change the terms of your home loan temporarily so you can catch up with payments2. They'll ask you what you can afford to pay in this instance, so make sure you know the maximum reasonable amount you can pay2. You want to work with your lender, and they can help with a solution that works for you.
Situation 3: You're behind on your mortgage payments
Falling behind on your mortgage payments might be totally unavoidable for you, and in that case, your lender has a number of options. In order to retain control over your mortgage, you should act as quickly as possible when you realise you're in trouble3, and be open with your lender. Communication is key.
Your lender may send you a letter if you miss a payment, and if you don't respond, they might send you a default notice, which gives you 30 days to pay what you owe (to catch up, essentially)3. Failure to pay may result in a Statement of Claim, which says you have a fixed number of days to lodge a legal defence3. If you do nothing, you may receive a Statement of Writ, which is a possession of your home3. Obviously you don't want that to happen to you, so make sure you catch any missed payments early and are honest with your lender.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
1MoneySmart, Keeping your mortgage on track. Accessed April 2017.
2MoneySmart, Missed a mortgage repayment. Accessed April 2017.
3MoneySmart, Behind on your mortgage. Accessed April 2017.