It’s not a nice position to be in – when your mortgage is in arrears and the bank is pressurising you to catch up the repayments or face having the bank sell your home. It can be very stressful and banks can seem totally unreasonable and difficult, and this adds to what is often the other stresses that caused the mortgage to end up getting behind too.
Most people never plan to not pay their mortgage, but it can happen for a number of reasons. Common reasons that we’ve seen are businesses struggling for self employed, redundancies and loss of employment, health issues, relationship and other family issues and there are a number of other reasons too.
You would like to think that the friendly bank staff will help you work through any issues, but unfortunately these sorts of things are often dealt with via a different part of the bank that often are not accessible or approachable.
But if you are in arrears and want to save your home from a mortgage sale then you need an experienced mortgage adviser on your side. Someone that is friendly, is on your side and has options to offer depending on your situation and how far through the process the bank has taken you.
You want a mortgage adviser that can help you with your “mortgage rescue” – to help save your home from a mortgage sale.
The banks generally follow a process (as below) but can be very difficult to deal with.
The Typical Process:
- When you are in arrears – if you are unable to make your mortgage repayments then you will fall into mortgage arrears, the bank will send you a reminder notice and that means the bank will start charging you the higher default interest rate, and if not resolved will start to chase you for a payment to catch up. They should also try to offer you a payment plan to help you catch up, but often what they propose is unrealistic and therefore not really possible.
- If you get into serious arrears – some banks will let you get behind without doing too much, but of course they will be charging you the default interest rates anyway. The banks should try and help, but often they pay lip-service to this and just say they will issue a “final notice” and suggest that you contact the banks hardship team if you feel that you need help.
- The Final Notice will be issued and sent to you if you are unable to catch up the arrears. This is a legal notice issued by the bank to advise that they are exercising their rights under both the Home Loan Agreement and the Mortgage, which includes the right to issue a Property Law Act 2007 notice without further notice to you.
- The Property Law Act Notice (PLA) is when things get really serious and these notices generally give you 21-days to catch up the arrears. Failure to pay the amount specified in the PLA Notice by the specified date will give the Lender the ability to recover all monies secured by the mortgage from selling the property.
- A Mortgage Sale – when this situation arises the bank sells the property in an attempt to recover the what is owed with the loan arrears and also to cover the banks legal costs plus any costs for the sale. As the bank control and force the sale process these rarely see people getting a fair value for their property.
The process can take some months and during this time the banks continue to charge default interest rates and charge you (the borrower) all the banks costs.
How Mortgage Rescue Works
It is important that the adviser establishes exactly what is needed for a home rescue as this will determine how you and the mortgage adviser will go about getting the required finance.
While you may have a mortgage adviser (mortgage broker) near you, it may be prudent to use an experienced mortgage adviser in these cases as they have more experience with these types of loans and have access to a full range of lenders with some that will provide options even after a PLA Notice has been issued.
Sometimes the best option is to get a personal loan or second mortgage which will enable you to catch up on any mortgage arrears, but other times you might be best advised to refinance the mortgage to a specialist lender to enable yo u to get back on track and ultimately bank to a bank or long-term lender.
There are a lot of factors that need to be considered, and things like the size of the mortgage and the value of the property do make a big difference too.
Stuart Wills leads a team of mortgage advisers that can help.
We do not judge … but we do our best to help save your home from a mortgage sale.
