Times are tough for all mortgage holders at the moment. Many borrowers who purchased their homes when interest rates were low are now struggling to make their repayments.
And if they remain in default for too long, they may find themselves faced with the possibility that their bank/lender (the mortgagee) will force the sale of their home to recover the debt. If this is becoming a possibility for you, its important to take action as soon as you receive notice of default, and that you know your rights so you can protect your interests in the event of a mortagee sale.
The first port of call if you’re struggling with your mortgage should always be your bank or lender. If you talk to them about your situation, there are several options by which they may restructure your repayment plan in order to enable you to meet your obligations. Options include:
- Changing the time and frequency of payments;
- Extending the term of the mortgage so that you have smaller payments to make;
- Changing some or all of the repayments to interest only until your circumstances improve; or
- A mortgage payment holiday.
Another option is to refinance your home with another lender on more serviceable terms.
However, your mortgagee may not be willing to offer you repayment relief, especially if they don’t think you’re likely to ever be in a position to repay your debt. But before they can take any action, the mortgagee must serve you a default notice under the Property Law Act outlining the missed payments and noting the full arrears (including penalties). You will then have at least 20 days to remedy the defaults after you’ve been served the notice.
If the defaults are not remedied by the expiry of the notice period, the mortgagee then has the right to force the sale of the home. In a mortagee sale, the first mortgagee and then any other claimants will recover what they are owed, and you will be left with the remainder. It is therefore crucial that if you are caught in this position you know how to get the most back for you that you can.
For this it is advisable to try to sell the home yourself. Mortgagee sales are often seen as ‘fire sales’ that don’t attract the highest value. Lenders will usually prefer to allow borrowers to sell themselves anyway so they don’t have to spend time and money to organise it.
However, if the mortagee does end up selling the house themselves, it’s important to know that they have a duty of care to obtain the best possible price. There are no set criteria for determining whether the duty has been met, but actions such as listing the house with a real estate agent and paying for marketing of the property are likely to be important factors. If there is a mortgagee sale discount offered unnecessarily this could also be counted against the meeting of the duty. If you consider that the mortgagee has failed to comply with their duty of care, you can take them to court and possibly unwind the sale, obtain an injunction or be awarded damages.
The pressure of defaulting on your mortgage can be an incredible strain. But it is essential to always keep your head and avail yourself of the best possible protection and expert counsel. If you would like any advice or assistance in getting through your situation, at Freebairn and Hehir Lawyers we’re always here to help.