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What can you do if your mortgage gets behind?
By Anna Producer


Mortgage stress home expenses[1]

Credit ratings agency, Fitch, recently reported that home loan defaults jumped up by 12.5 percent in the last three months of 2010.This is not surprising. The end of the year is when many people feel the financial pinch. There’s Christmas to pay for, summer holidays and extra socialising and entertaining to take into account. Even using the air-conditioner a little more over Christmas can hurt the household budget. Epic floods and cyclones also don’t help.

What can you do if your mortgage gets behind?

Don’t put your head in the sand. It’s important to act quickly. Lenders often issue default notices after mortgage payments have been missed for three consecutive months.

Create a household budget to work out how much you can afford to pay towards your mortgage.

Speak to your bank as soon as you realise you’re going to have trouble meeting a payment. Armed with your household budget, you can then propose a reduced payment plan which you know you can afford.

Prioritise your bills. What are the most important bills to pay first? What are the consequences of not paying a bill? Having your rental TV repossessed, for example, has fewer consequences than receiving an eviction notice. Most people rate their home loan as their most important financial commitment, but it can be easy to become confused when other creditors are harassing you for payment.

Keep the lines of communication open with your other creditors—explain your situation and speak with them about reducing your payments. Some may even consider a moratorium (a period of time in which you’re not required to make payments) while you get back on your feet.

Consider options like debt consolidation, but do so very carefully. A debt consolidation loan might free up your cash flow in the short-term, but it could significantly increase your overall costs in the long-term. At MyBudget, we find that about 97 percent of the people we see can pay their way out of debt through budgeting and without taking on more loans.

Ask for advice from people you trust. Many people fail to acknowledge their financial difficulties early enough and their problems quickly snowball. At MyBudget we offer free consultations to the public. You should never feel embarrassed to seek assistance, even if it’s only from a friend or family member.


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