Since the beginning of the Covid-19 pandemic, banks and financiers have allowed customers to defer loan or finance payments. These measures were to end in September 2020 however, the majority of lenders have extended them until January 2021 for customers suffering severe financial hardship.
A survey conducted recently showed that 40% of those intending to continue with the loan deferment overstated their income in their mortgage application and 15% of them understated their liabilities. The same survey found that a massive 67% of people who have asked for deferrals are on JobKeeper and 25% are on JobSeeker.
What is clear is that many people deferring loan repayments are not in a position to continue with mortgage repayments when the deferral period ends.
So, what can you do if you worry that you may not be able to continue with mortgage repayments once you can no longer defer them?
What you can do
The best approach is to be proactive with your financial affairs and deal with them head on. Simply sitting and waiting will not solve your problems. And there are several things that you can do now to better prepare yourself for when repayment deferrals end.
Selling your property
One of the options available to you is of course selling your property. If you have a property that is currently worth less than your mortgage, we can help you negotiate a settlement of the shortfall. We have previously assisted clients in negotiating such settlements and you can read about them here and here.
It is of course not an easy decision to make to sell your property, especially if the property is your family home. If selling your property is not an ideal solution for you, you may consider a refinancing instead.
Refinancing your mortgage
If a substantial portion of your mortgage has been paid over the years, chances are that there is a substantial equity in your property. In this case, you may choose to refinance the mortgage to reduce the monthly mortgage repayments. A refinancing can be done with your current financier, or another credit provider that offers a lower interest rate. If you need assistance, we can recommend someone who can help you with refinancing.
This is a good way to ride out the current downturn, and you can start repaying more when things are better to reduce the mortgage life.
Negotiate settlements with your creditors
Another way in which you may reduce your expenses or liabilities (and allow you to pay more towards your mortgage) is to negotiate a settlement or payment arrangement with your other creditors. Some of the creditors which you may want to negotiate with are the ATO and your banks or financiers for personal loan or credit card debts. You may even have a debt arising from a personal guarantee that you have previously provided.
For years we have assisted clients in negotiating payment arrangements for tax debts, settlement of debts with credit providers, and settlement of personal guarantee debts. These are informal arrangements which are usually quick and cost far less than other formal insolvency appointments. Having reduced liabilities every month may mean you can afford your mortgage repayment and keep your family home.
Contact Us For Assistance
We are a team of consultants who are members of Chartered Accountants Australia & New Zealand and the Australian Restructuring Insolvency and Turnaround Association. Our experience in the industry allows us to explore all the options that are available to you if you can no longer afford your mortgage repayments.
So, get in touch on 1300 906 966 or send us an email at firstname.lastname@example.org to arrange a free confidential initial discussion.