Can I refinance my home loan?
You can refinance a home loan with missed payments, however the amount that you can borrow and the lenders that you can apply with will depend on your situation.
- Minor late payments: You can borrow up to 80% with a major lender or 90% with a specialist lender.
- Up to two missed payments: You can borrow up to 80% of the value of your property with a specialist lender.
- The lender is taking legal action: You can borrow up to 75% of the value of your property with a specialist lender, however you must prove that you are no longer in financial trouble.
Please call our mortgage brokers on 1300 889 743 or enquire online to find out how we can help!
What is a mortgage in arrears?
Mortgage in arrears is when you have not made the required payments on your home loan. This includes missed repayments, late and overdue payments.
Generally, people find themselves in this financial situation due to life circumstances such as illness, loss of employment, divorce or situations that are unexpected and certainly unplanned for.
Home loan arrears are a very serious business that could result in the bank re-possessing your house and selling it to recover their money.
However minor arrears due to a one off event can be dealt with directly with your lender usually without the need to refinance. Long term problems on the other hand may require a complete financial overhaul.
Missed payment or late payment?
If you have made several late payments or have missed payments on your mortgage then it is likely that you will find it hard to apply for a loan through the major banks and lenders.
This is because they are able to see the arrears in your mortgage and do not want to approve a loan for a borrower who does not have the capability to make regular repayments on time.
You should be aware that having a missed payment and failing to make your repayment on time are two very different situations:
- A missed payment is a payment that you completely missed and never made up.
- A late payment is one that you did not pay on time but did eventually make up the repayment.
Therefore, you should always try to pay your repayments on time and be completely aware of the monthly payment date especially if the repayments are by direct debit.
How do lenders view your current arrears?
The major banks and other prime lenders will not approve your loan if they can see any arrears. They do not lend to people who have missed payments on their current home loan, in particular during the previous six to 12 months – they are very strict in this regard.
There are specialist and non-conforming lenders that can help! They tend to assess your loan based on how long it took you to make up your missed payments
and if you can handle your current commitments or if you are over committed.
Please enquire online or call us on 1300 889 743 to speak to one of our specialist mortgage brokers who can find you the best lender to get your loan approved!
How to refinance if you have arrears?
To refinance your current home loan, you will need a specialist mortgage broker to find you a lender that can consider your situation. This is particularly true of people that are close to having their home repossessed.
However, we will not help people that do not benefit from refinancing their arrears. If you cannot make the repayments on your home then it is better to sell your home rather than refinance and just end up in the same situation again.
Please enquire online to speak to our specialist mortgage brokers who will guide you to the right direction.
What is the arrears rate / default interest rate?
If you are behind with your payments then the lender will charge you a default or penalty interest rate. This is normally charged on the amount that is overdue, however in some cases this will be charged on the entire loan amount.
This is why it is extremely important that you make your repayments on time – you will avoid the risk of being charged any defaults on your loan.
How long is it until your bank takes action?
The banks will take action when they can see that there have been constant arrears on your home loan.
- High LVR over 80% – generally 2 missed payments
- Low LVR under 80% – generally 3 or more missed payments. In this situation, the banks will tend to work with you rather than possess your home.
Some lenders tend to take action faster than others depending on their hardship policy. It is important to talk to your lender and work with them rather than hide and to look for an exit strategy such as selling your home, refinancing or consolidating your debts.
What action will your bank take?
“Empathy” is not the word that best describes our financial institutions of today. The welcoming smiles that we see on television advertisements can disappear when the customer’s life circumstances changes for the worse.
The banks sometimes have no hesitation in taking action if the borrower has breached their contract, which is generally when they have a mortgage in arrears.
If the bank believes that you are unwilling or unable to co-operate then they will almost surely take quick and decisive legal action against you.
How can I apply to refinance my home loan in arrears?
The longer you leave it the more bank fees, lawyer fees and real estate fees will eat into your equity that you have in your home.
Most of the time a new home loan or debt consolidation can be approved with the right lender, you just need an expert to find that right lender!