What To Do When You Can’t Afford Your Mortgage

02 Dec What To Do When You Can’t Afford Your Mortgage

Many New Zealanders face significant financial strain as record-high inflation and the rising cost of living continues. Add to that increasing interest rates and higher mortgage repayments, and it’s not hard to see why so many homeowners are already struggling to repay the mortgage. For first home buyers who entered the market at the peak of the property boom, mortgage affordability could soon become a major concern. If you’re a homeowner worried about repaying your mortgage, here are the steps to take.

Step 1: Assess your financial situation

A financial check-up can help you determine what changes you need to make to improve your financial situation. Start by scrutinising your income and expenses and consider how you could improve either of these.

Increase your income:

• Rent out a room or get a flatmate to help pay your mortgage
• Rent out a garage or a car park space for extra income
• Check if you’re eligible for benefits – you may be able to apply for an accommodation supplement
• Pick up some extra part time work such as an Uber driver or delivery driver
• Declutter and sell some stuff online

Reduce your expenses:

• Cut back on non-essential spending
• Shop smarter – take advantage of online offers, discount days and in-season produce
• Cook meals and eat at home instead of eating out or getting take aways
• Compare pricing for utilities and switch to a cheaper service provider
• Have a Max Insurances Adviser go over your insurance policies to check that you’re paying the best price for house insurance, contents insurance, and car insurance

Lastly, if you have mortgage payment protection insurance, find out how you could access this policy to help cover your mortgage repayments until you’re back on your feet again.

Step 2: Talk to your lender

Getting behind on your mortgage repayments is a serious concern and an obvious cause of major stress. If you know you’re going to struggle to meet your mortgage repayments, it’s vital you talk to your lender without delay. The sooner you get in touch with your lender, the more chance there is of finding a viable solution.

Depending on your situation and the type of mortgage you have, your lender may agree to reduce your mortgage repayments to help you get through a period of financial hardship. Lenders may consider:

• Extending your loan term to reduce the amount of each repayment
• Changing to interest-only payments for a short time

Step 3: Get advice from an experienced Mortgage Adviser

Before moving ahead with any decisions about your mortgage, it’s worth consulting with an experienced Mortgage Adviser, such as those at Max Mortgages. Not only can a Mortgage Adviser provide unbiased advice about some of the ways to move forward in your unique situation, but they may be able to assist you with financial solutions to help improve your financial position, including:

• Debt consolidation: If you have multiple debts to juggle, consolidating your debt into one personal loan can be a great way to help simplify your repayments and get your debts back under control.
• Mortgage refinancing: A Max Mortgages Adviser can help you explore your financial options and find the best solution available to you, such as refinancing with a lender offering lower interest rates or more suitable loan terms, which could make your mortgage repayments more affordable.

Step 4: Selling your home

The possibility of a mortgagee sale of your home is understandably a stressful prospect. So, if you’ve explored all other avenues and you believe your financial situation is unlikely or unable to improve in the foreseeable future, selling your home before you miss a repayment and the lender repossesses may be the right option for you. To help you steer clear of some of the problems that could trip you up when selling your home, our Mortgage Team has pulled together some common mistakes people make when selling a home and we hope this article will help you avoid these mistakes.

Here to help you get through

When faced with financial hardship, it can be difficult to see a way out. But whatever your circumstances, there are some steps you can take to get through these tough economic times, and regain control of your finances. Contact a Max Mortgages Adviser today to find out what options are available to you, if you are already struggling to repay your mortgage or you know you’re heading for financial difficulty.

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