This is the hardest decision. You need to consider selling your home if you will continue to be unable to afford your loan repayments for some time to come.
You need to make this decision as early as possible because:
- it is better to sell your home yourself rather than have the lender sell the home for you, and
- you are more likely to get a better price for your home and avoid lots of legal costs if you sell your own home.
The decision whether to sell your home is most difficult when:
- you are unemployed and trying to get a job, or
- you are ill and trying to get well but you just don’t know when you will recover, or
- you are waiting for a compensation payment or a family law settlement.
In these situations you are hoping that you can make the loan repayments soon but you don’t know when this will happen or if it will happen before the lender goes to court to take possession of the home. You can ask the lender for hardship, ask for extensions, and take the matter through AFCA to buy time – but the difficulty is that as time goes on things are going to get worse and you will get further and further behind on your loan repayments.
You may be better off selling earlier to avoid extra interest, fees and legal and court costs, and walking away with as much money as you can.
In these circumstances, you should consider:
- making a repayment arrangement with the lender for up to 6 months, and
- if by the end of the 6 months you still cannot make the loan repayments, go back to the lender and negotiate a further arrangement on the basis that you are selling your home.
-
Coming into money before your home sells
If you get a job, get well or get a large lump sum of money before your home sells, you still have the option of trying to negotiate a further arrangement on the basis you can now pay the loan although this will be more difficult if the lender has obtained a court judgement.
By when do I have to make a decision?
You need to make a decision to sell your home as early as possible and preferably BEFORE the lender commences any legal proceedings. It is never too late to ask for time to sell, but the lender is less likely to agree later in the enforcement process and court and legal costs will be added to your loan.
You need to give yourself as much time as possible to sell your home and get a good price for it.
I’ve decided to sell my home. What do I do now?
Step 1
You need to place your home on the market. You need to price the home realistically so that it will sell but for the best price possible in the circumstances. If you are using a real estate agent you should explain what time frame you need to sell the home within. This will usually be under 6 months but could be under 3 months depending on what arrangement you make with your lender.
Step 2
You need to give copies of evidence that you are selling your home to the lender. This evidence should include (where available):
- a copy of the contract with your real estate agent
- evidence that you are advertising your home
- the front page of the contract of sale
- your marketing plan for selling the home.
Step 3
Negotiate a repayment arrangement on the grounds of financial hardship with your lender. See Chapter 5: Catching up on repayments: my options.
You are negotiating the arrangement on the basis that:
- you are in financial hardship
- you can make regular repayments of what you can afford until the home is sold (or you can ask to postpone payments if you cannot afford anything)
- you have a reasonable time to exchange contracts for the sale of your home (ask for 6 months but you may need to consider agreeing to 3 to 4 months)
- when the home is sold, your loan will be repaid.
Step 4
If you sell the house, you need to notify the lender as soon as possible and provide evidence of the sale.
You should lodge a complaint with AFCA immediately if either:
- you are unable to make a repayment arrangement with the lender
- the lender is threatening to commence legal action
- your 30 day default notice is about to expire
- the lender has issued you with a statement of claim or summons but has not obtained a court judgment
- you have lodged a defence in court but have not taken a (significant) step beyond that (if in doubt, lodge your complaint to AFCA anyway, then get advice)
- you have received a notice to vacate with an eviction date (you should also get urgent legal advice immediately because AFCA may not have time to help you if you lodge too close to the eviction date).
-
Complaint resolution scheme
The complaint resolution scheme, AFCA, is free and lodging before the lender obtains a court judgement stops legal action while AFCA considers your hardship complaint. However, lodging with AFCA after the lender has obtained a court judgement may not stop an eviction if you lodge too close in time to the eviction date. You must lodge with AFCA as soon as you receive a notice to vacate from the Sheriff and get legal advice at the same time.
What if my home is worth less than the amount of my loan?
If you think your home may be worth less than the amount you owe on your home loan, get legal advice.
You can still negotiate to sell the property yourself, but if the net sale price will not be enough to pay the mortgage off in full, get your lender’s permission to sell at that price first – get legal advice if your lender refuses.