The best thing to do if you think you will miss a payment is to discuss your circumstances with your lender.
Part of having a mortgage is ensuring that you’re able to pay what you owe, on the date that it’s due.
There are any number of circumstances that might prevent this from happening, of course – including everything from a bank error to the possibility that you’ve fallen on difficult times - but it pays to know what happens if you do.
What to do if you miss a payment
If you miss a mortgage repayment and there’s a chance you’ll miss more, your first step should be to contact the mortgage provider to explain the situation. Better still would be to get in touch with your lender beforehand if you suspect you’re likely to have trouble paying.
There’s a certain level of protection in Australia for people undergoing financial hardship. Under the rules laid out by the Australian Securities and Investments Commission (ASIC), the mortgage provider must assess your case and provide options to help rectify the situation and come to an agreement that suits both them and you.
The general consensus where banks are concerned is that it’s in their better interests not to be kicking people out of their homes when things get rough. As you can imagine, foreclosures tend to be terrible PR for banks so where they’re possible, alternative solutions are better for lenders too.
When you initially make contact with your mortgage provider, they’ll ask you to explain why the payment was missed. From there, they’ll try to come up with a planned solution for ongoing payments with you, and try to provide a solution if you need further financial assistance.
What sorts of arrangements will your lender make?
Most commonly, if you can’t make your payments your mortgage lender will propose either:
- A lower rate of repayment (temporary or permanent) – with the necessary readjustments to the rest of your loan
- A ‘loan holiday’, under which your repayments are postponed for a given amount of time and where your interest is capitalised.
While mortgagees will generally do their best to come to some agreement with you about future payments, if all other options have been exhausted then the lender will inevitably have to foreclose on and sell your house.
