What happens when you miss a home loan repayment? Before you are faced with this situation, you should act fast even before or after missing a home loan repayment. If you feel like you won’t be able to fund your check or if you are honestly going to be late for loan repayment, fix the situation ahead and increase your options on how to resolve this issue by talking to your lender in advance.
Missing a mortgage repayment is not the worst situation you can get into when taking out a home loan. Your lenders are more than happy to help. Here are the basic things you need to know when you are about to skip or fail to repay your home loan.
1. Arrears management fees may be applied due to late payments.
Late payments or non-payments are clauses included in your mortgage agreement or contract. Revisit your home loan documents to get a more accurate idea on how much additional rates or fees will cause you if you continue skipping on your mortgage repayment.
2. Dishonor fees charged and applied to direct debits, periodic payments and cheque payments from your account that were rejected due to insufficient funds.
There are also fees included in bounced checks, failed direct debits or scheduled payments and the like. Be aware of these amounts that you need to worry about.
3. Default interest rates are usually charged on overdue payments
These percentage or amount is also included in the mortgage contract that you signed during your home loan release.
4. Home loans may be withdrawn and force you to settle the full amount of you mortgage in cash.
This is one of the biggest fears most homeowners worry about when they fail to pay their mortgage on time or if they continuously default. However, talking with your lender gives you options on how to resolve this.
5. Enforcement costs such as legal fees and court documents will be passed onto you
In the event that you fail to coordinate with your bank and continued missing payments on your mortgage, your lender may resort to legal actions. You will be the one responsible fo the fees and other expenses this legal action may incur.
Missed a Payment? Here’s what you should do.
Contact your lender
Your lender can never access and help you with your current situation unless you inform them about your current dilemma. You will need to provide the following information to your lender.
- Why you missed a payment
- How do you plan to pay it back and where will your funds come from
- How your bank can help in getting you back on track
Talking to your lender about your financial issues may be stressful and can sometimes be stressful, but this can happen to anyone. Taking action simple means that you are willing to fix the problem as soon as possible and is a good sign for most lenders. Usually, lenders will only take notice after two missed payments, but are still dependent on your loan-to-value ratio.
- 80% LVR or more – two missed repayments
- Under 80% LVR – three or more missed payments
It is really ideal to talk and coordinate with your lender instead of finding an quick escape route. Borrowing money to repay your debt will just make it even harder for you to repay your loan. Interest rates will accumulate and you may end up cash-trapped in debt.