Below is a list of options to consider to help you catch up on your mortgage payments. As none of the options below are certain to work, you MUST still make a repayment arrangement based on your income (see Chapter 6: Making a workable repayment arrangement).
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Your possessions
There is no point selling your possessions, accessing your superannuation or getting further loans if you will need to sell your home anyway.
Catching up on your mortgage repayments
- Do a budget and cut down on unnecessary expenses. A free financial counsellor can help. See Chapter 14: Useful contacts.
- Rent out your home and live (hopefully rent free or cheaper) somewhere else until you can manage your repayments.
- Take in a boarder.
- Get mortgage assistance (if available). See Chapter 11: Mortgage assistance.
- Access your superannuation (if available). See Chapter 10: Getting your superannuation.
- Sell some of your possessions.
- Consider refinancing your home loan (only if you can get a cheaper rate and you can afford the new repayments. Beware of predatory lenders (see below).
- Ask for a repayment arrangement on other debts while you catch up on your mortgage. Do not simply ignore other debts as you can eventually lose your house because of unsecured debts like credit cards – it just takes a bit longer.
- Consider changing your loan to an interest-only loan fora fixed period (this will reduce your repayments during this period).
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Beware of predatory lenders
If you are considering refinancing your home loan be careful to avoid high cost, exploitative lenders.
Things to look out for and warning signs that the loan might be high cost
- The loan is described as a business/investment loan or you need to sign a declaration to state that the credit law does not apply.
- The lender is not a member of the free complaint resolution scheme AFCA. You can check using the AFCA website's financial firm or superannuation finder.
- The mortgage broker charges a large fee.
- The loan is for a short term.
- The loan is for interest only for a term but you cannot afford to repay principle and interest repayments.
- High interest rates, and/or high default interest rates or fees.
- Interest rates quoted “per month” instead of “per annum”.
- You do not have to make repayments for a set period, or the whole loan, but the whole loan amount is payable within a short time (less than 5 years).
Do not refinance if the repayments on the new loan will be higher than the repayments you are currently required to pay! You do not want to still be forced to sell your home a few months or years down the track, but after having lost all the equity (savings) you’ve built up through high interest and fees by refinancing into the wrong loan.