By Steven Csikos, Mortgage Choice in Sydney Hills District
Mortgage Choice broker Steven Csikos says early action is critical to manage your mortgage following the loss of employment.
Unemployment is something many of us fear – especially when there's a mortgage to repay – but some important steps can make the situation more manageable until you get back on your feet financially. Hopefully you'll never need to put these steps into practice but it's worth knowing what's involved.
If your financial situation changes dramatiacally due to unemployment, unexpected illness or injury, it's important to take action early! Contact your broker and explain the situation. If you don't have a broker, you may need to get in touch with your lender directly.
Several types of relief are available
Current legislation demands that all lenders must consider requests for repayment relief, and while this inevitably means filling in a few forms, you may be offered valuable repayment relief.
This can come in a variety of forms depending on your lender's policy. Your monthly loan repayments may be adjusted – the exact amount will vary according to your situation and your lender. Or you may be offered a repayment holiday, with no repayments due at all for anything up to 12 months.
Alternatively, your loan may be converted to interest only repayments for a set period, which will lower your monthly payments.
Home owners who have been making extra repayments may be able to use a redraw facility to keep up their loan payments. In some cases though, the lender will rely on these additional repayments to fund your repayment holiday.
Expect to make up for lost time
Each of these options can help you cope with your home loan until you find a new job, however from your lender's perspective any variation from the current terms of your loan will need to be compensated for at a later stage.
It may mean the term of the loan's extended for several more years or you may be asked to make additional payments to squeeze the loan back into its original term. Of course, once your finances are back on track there's always the option of refinancing to a new loan or lender.
Early action preserves your good credit record
It's worth stressing that if you take early action without your lender having to chase overdue payments, your personal credit record shouldn't be tarnished by the experience of unemployment. That's important because this is an essential starting point if you want to refinance your loan further down the track.
If your lender refuses to budge
If you're not happy with your lender's response to requests for mortgage relief, the next port of call is to contact the appropriate ombudsman, who will deal with lenders on your behalf.
If your home loan lender's a bank, contact the Financial Ombudsman Service, or if you have your mortgage through a non-bank lender including a building society or credit union, get in touch with the Credit Ombudsman Service. Both offer a free service to consumers.