Facing mortgage stress and financial hardship can be overwhelming. Still, there are steps you can take to manage the situation effectively. Whether you’re dealing with reduced income, unexpected expenses, or rising interest rates, knowing your options and seeking assistance can help you regain control. Here’s practical advice for borrowers in Australia experiencing financial difficulties, including options for renegotiating loan terms and seeking legal assistance.
Assess Your Financial Situation
Start by taking a comprehensive look at your financial situation. List your income, expenses, and debts to understand your cash flow. This assessment will help you identify areas to reduce and prioritise your spending.
Communicate with Your Lender
If you need help to meet your mortgage repayments, contact your lender as soon as possible. Lenders are generally willing to work with borrowers facing financial hardship. Explain your situation and explore the following options:
- Repayment Holiday: A temporary pause or reduction in your mortgage repayments.
- Extended Loan Term: Extending the term of your loan to reduce your monthly repayments.
- Switching to Interest-Only Payments: Temporarily paying only the interest on your loan, reducing your monthly obligations.
Explore Hardship Variations
Under the National Credit Code, lenders must consider requests for hardship variations. You can apply for a variation if you’re experiencing temporary financial hardship due to illness, unemployment, or other unforeseen circumstances. Options may include:
- Extending the Repayment Period: Giving you more time to repay your loan.
- Postponing Repayments: Deferring your repayments for a set period.
- Reducing Repayments: Lowering your repayment amount for a specified time.
Seek Financial Counselling
Financial counsellors provide free, confidential advice and can help you develop a plan to manage your debt. They can also negotiate with creditors on your behalf. The National Debt Helpline (1800 007 007) can help you find accredited financial counsellors.
Refinance Your Mortgage
Refinancing your mortgage can help reduce your repayments by securing a lower interest rate or changing the loan terms. Compare different lenders and consult a mortgage broker to find a more affordable loan option.
Consider Government Assistance Programs
Various government programs and grants are available to assist borrowers in financial distress. You may be eligible for research programs such as emergency relief payments, rent assistance, or financial support services.
Review Your Budget and Cut Costs
Creating a detailed budget can help you identify non-essential expenses that can be reduced or eliminated. Consider lifestyle changes that can lower your overall costs, such as reducing discretionary spending, finding cheaper alternatives for necessary expenses, and seeking ways to increase your income.
Seek Legal Assistance
Legal assistance can provide valuable support if you’re facing severe financial hardship and risk losing your home. Legal aid organisations and community legal centres offer free or low-cost advice to help you understand your rights and options.
Explore Alternative Income Sources
Look for ways to supplement your income, such as working part-time, freelancing, or selling unused items. Additional income can help you meet your mortgage repayments and ease financial stress.
Consider Selling Your Property
Selling your property may be necessary as a last resort to avoid foreclosure and repay your mortgage debt. While this decision is difficult, it can provide a fresh start and prevent further financial strain. Consult a real estate agent and financial advisor to understand the implications and best approach.
Handling mortgage stress and financial hardship requires proactive steps and informed decision-making.
By communicating with your lender, exploring available options, seeking professional advice, and making necessary lifestyle adjustments, you can navigate financial difficulties and work towards stabilising your situation.
Remember, you’re not alone—various resources and support systems are available to help you through challenging times.