One of the most intimidating thoughts for a new home buyer, is what they can expect to happen if they can no longer afford to repay their mortgage. Even those that have been paying back what they borrowed for a decade could face the same consequences as those that breach their agreement in a matter of months – but what can you really expect your lender to do if you stop paying what you owe?
The first thing that we have to point out is that at The Mortgage Calculator, we always encourage those that use our services to ensure that the right measures are in place to guarantee their repayments. Not only can a missed deadline result in a fee, it can also take its toll on your credit report – and this could really make it difficult to receive a loan of any type in the future.
The real consequences
A bank is a type of financial company and like most businesses, they will expect to be paid back what they lend to their customers (with interest).
In the past, it wasn’t uncommon to hear about lenders issuing repossession notices after just a few months of failed repayments, but these days most are a lot more lenient and will be more than willing to discuss alternative options with their borrower. This is why the first port of call will be the opportunity to re-negotiate terms.
If the borrower has simply fallen on hard times, or if they will only be struggling temporarily, then some banks can be extremely lenient – especially if the borrower has a mortgage broker on their side to help with the negotiations. In some cases lenders may extend fees for late payments, but these can be fairly minimal when compared to the risk of having a property repossessed.
The last resort
If an agreement can’t be reached regarding a payment extension, or if new terms can’t be ascertained, then the buyer will usually be issued with a notice to let them know that what they owe is expected, within a specific deadline. If all costs are paid by then and debts are brought up to date, then the borrower will have the option of continuing as usual with their mortgage.
If not, then the last resort that a bank will pursue to reclaim what they are owed, will be through repossession. This can be one of the worst situations for a family to have to deal with, especially as repossession will include the eviction of all occupants. To avoid this instance from the offset, we’d advise you to ensure that you not only find the best deal on a loan, but you make sure to put money aside each month to cater to the costs of your repayments.