Foreclosure.net.au

Let’s say you run into some hard times. You have a mortgage payment that you can’t make. Are you doomed to foreclosure? Is it hopeless? Will you lose your house? Your good credit rating? Everything you’ve worked so hard to accomplish?

Just because you have fallen on some hard financial times is no reason why you should give up on keeping your home, nor is it any reason to feel doomed to ruined credit. There are options. Here are the ones we recommend.

A mortgage refinance requires getting a new mortgage on your home and using the new loan to pay off your current mortgage. There are benefits to refinancing your mortgage. A lower interest rate or the possibility of more favorable terms may keep the monthly payment more affordable for you. It also may allow you to extend the term of your mortgage which will reduce your monthly repayments. Many people have found through mortgage refinance that they have been able to pay off their loan more quickly. 

 

If you are having difficulty making payments on high interest credit card loans, a refinance may allow you to consolidate these debts into your mortgage. A refinance also allows you to draw down funds against your home to pay for personal expenses. This can be a lifesaver when it comes to paying other debt you have incurred during your hard times and it can absolutely save your credit rating. Many people who have nearly given up on financial independence have found debt consolidation through mortgage refinancing to help because it requires them to only make one payment per month, as opposed to several smaller payments.

Recently the use of debt agreements has grown. A debt agreement is a legal agreement where a borrower agrees to pay a specific amount of money over a prescribed time period to satisfy the complete and total debt. We view the increasing number of people choosing to enter into debt agreements as a reflection of their simplicity, flexibility, and reasonable cost to the borrower. 

 

In 1996 the Bankruptcy Act was introduced. It was a huge help to those who didn’t have too much debt and a low income, but who were still not have to meet their financial obligations, the ability to avoid bankruptcy. 

Sound good? It is relatively easy to arrange a debt agreement. You must develop a debt agreement proposal. This can be achieved in consultation with a financial counselor or family member. You must include a statement regarding your financial position. The Insolvency and Trustee Service Australia (ITSA) office reviews the proposal. If the ITSA office comes to the conclusion that the agreement is in the best interest of the lenders as well, it will meet with the affected lenders. If the debt agreement is accepted by at least three-quarters in value of the voting lenders, then the agreement is accepted.    This means that the borrower is released from all verifiable debts. Even the lenders who did not vote for the agreement cannot attempt to recover their funds outside of the agreement.

 

A growing number of people are using debt agreement as an alternative to personal bankruptcy. This option is now equal to one quarter of all personal bankruptcies. It is simply a better option for borrowers who are in a financial bind. It allows borrowers to remain in control of their own finances. It has a much lower impact on a borrower’s credit rating than personal bankruptcy. It allows borrowers to retain their assets.   Creditors like it too. They generally receive an average of 80 cents on the dollar with debt agreements as opposed to 50 cents on the dollars with personal bankruptcy.

 

Regardless of any threatening letters you may receive from the bank, they do not like handling bankruptcies and foreclosures. Most of the time, if you have had good past payment history, a bank will willingly enter into an informal agreement with a lender. The first step is to pick up the phone and ring them. Don’t be afraid to talk to the bank. They handle these calls all of the time and they want to work with borrowers who are willing to make good on their debts with a little time and some flexibility.

You might also want to seek the advice of a credit counselor or a bankruptcy attorney. They can help you determine terms that are achievable for you to get you back on track.

 

You know when you are “house poor.” No amount of renegotiating or refinancing will help you get the necessary funds to stay in a home in which you can’t afford to live. If your financial hardships have grown so severe that you can’t, and will never be able to make your monthly mortgage payments, then it is time to think about selling the house. Instead of waiting for the bank to come in and foreclose—leaving you broke with bad credit, put the house on the market and sell it for an amount that will allow you to pay off your mortgage and walk away with some funds from your equity. Sometimes moving into a smaller house or purchasing a property that is smaller in size will help your life and finances seem much more manageable. 

 

Some other selling options might also be to sell part of your home to someone in your family upon the agreement that when you sell the house they will get a percentage. Both options require some swallowing of pride. But remember the alternative—foreclosure. 

 

This is called “release of superannuation.” If you have been working and putting money away for retirement, you may have enough in your retirement fund to solve your temporary financial crisis. The law allows for releasing these retirement funds on certain conditions. If the payments received from retirement funds will prevent foreclosure or prevent an individual from having to sell his primary place of residence, then these funds can be released. There is one stipulation, the payments cannot be for more than three months mortgage repayments plus twelve months interest in any twelve month period.

 

If it sounds like you could solve your financial hardship by obtaining these funds, then it is a very low-impact solution to your debt. But remember to only use this option if you have enough retirement funds to cover it and only if you believe that your financial hardship is temporary.