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What happens when mortgage repayment is not made

Discussion in 'Property Finance' started by Rooky, 13th Jan, 2016.

  1. Rooky

    Rooky Well-Known Member

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    Hi All,

    Does anyone has detailed or possible firsthand knowledge of what happens when mortgage repayment has not been made ? I want to know particulalrly how much time is given to borrower and how bank is going after other assets of borrower to recover debt.

    For e.g. Lets say loan against property A is not paid. Borrower has property B mortgaged with other financial institution. How much time borrower has before property A lender can go for property B which has been mortgaged with lender B ? How lender B will protect his security against claim made by lender A?

    Basically, i am thinking how we can minimize risk in case of default ?

    With regards,

    Rooky
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    A loan repayment? The lender will add the interest to the loan, and perhaps a penalty, but not do much straight away. After a few missed payments they will become worried and start trying to contact the borrower.

    Generally it will then go the lawyers and the legal fees start adding up. After about 6 months they will try to enforce their rights under the mortgage. Court proceedings will commence and they will take control and sell the property, pay out the loans secured by it and the legal fees. Any left over will be held for the mortgagor on trust until it is paid.

    If there is a short fall they will then seek to recover this from other property you own. Possibly by just issuing a bankruptcy notice. You would then have 28 days to pay or a trustee would be appointed to sell all your assets.
     
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  3. Marg4000

    Marg4000 Well-Known Member

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    Are you in danger of defaulting?

    If so, contact the bank yourself. You may be able to work out a payment plan.

    Don't wait for them to come after you.
    Marg
     
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  4. HUGH72

    HUGH72 Well-Known Member

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    If there are funds in another offset they may take them from there, otherwise expect a phone call within a day or so from the financial institution if insufficient funds are in the account.
     
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hi Rooky

    If you're worried about defaulting - inform the bank of the issue. Transparency is key. Hopefully they'll assist in devising a plan.

    Cheers

    Jamie
     
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  6. Scott No Mates

    Scott No Mates Well-Known Member

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    Larry Loan Shark doesn't wait. Expect a knock on the door at 3.37 am ;)
     
  7. Angel

    Angel Well-Known Member

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    Have you read the conditions in the mortgage document?
     
  8. tobe

    tobe Well-Known Member

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    If you are upfront and act in good faith you will probably get over a year before they try to sell. As others have said make a payment plan and keep in touch with them and your odds of losing the house are very low.
     
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  9. Rooky

    Rooky Well-Known Member

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    Hi All,

    Thanks for your concern. No, i am not under stress at all.
    I was considering apocalypse like scenario and what can be done to buy some time and how one can minimize the risk.

    Rooky




    I
     
  10. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    In that case - save, save,save. Have a healthy figure sitting in an offset.
     
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  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Minimise the risk by
    1. having all loans with separate lenders
    2. not having joint loans with others
    3. Removing money from accounts at the same banks as the loans at the time you go down (if you had money you probably wouldn't be unable to pay)
    4. Stop repayments on 1 loan while you keep paying the others so only 1 property is immediately at risk
    5. Immediately trying to sell 1 or more properties before the lender does
    6. keeping a healthy buffer
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Incidently I just read an article in which this appears:

    So about half of one percent of CBA loans are in arrears of more than 90 days.
     
  13. Sonamic

    Sonamic Well-Known Member

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    Minimise risk by not missing a Repayment. Even if you are a day late they will charge a late fee. Direct Debit from your Nominated account should prevent this. Just make sure the account ALWAYS has enough to cover a Repayment or two if you're keeping all your cash in a seperate PPOR Offset.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    keep in mind if you do miss a repayment it will become more difficult to refinance, even if you do have heaps of equity.
     
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  15. dabbler

    dabbler Well-Known Member

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    I would suggest not delaying, especially so if it is a falling market.

    As others have said too, putting head in sand to avoid consequences is like a child covering the eyes and thinking no one can see them.
     
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  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Interestingly, the head in the sand technique is extremely common in these situations.
     
  17. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    Hi @Terry_w,
    If you're even a day late on one repayment, does that hit your credit file? And is this quite a severe hit to the file?
    Just curious, I've never been late on payment.
     
  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No, I think it has to pass a certain stage like 30 or 90 days and they have to notify you beforehand.
     
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  19. jpcashflow

    jpcashflow Well-Known Member Business Member

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    Hi, If you want to minimize any risk I think just set up some easy measures.
    For our investment properties we have about 3 months worth of cash sitting in each loans offset account just in case something happens.

    But my wife and I have taken this to another level, We have enough funds saved that even if we did not work for two years we would be fine.