What to do if I can’t pay the mortgage?

If you can’t pay your mortgage right now, you are not alone.

At the end of 2020, data from the credit reporting agency Centrix showed there were 15,000 Kiwi mortgages in arrears. If you are struggling to meet your mortgage repayments, there are always options to resolve the debt problem.

The Debtfix Crew have put together the following guidelines for you.

1. Talk to the lender

The golden rule of sorting out all debt problems is to talk to the organisation you owe money to and let them know you are struggling to make repayments. Mortgages are no exception to the rule.

A bank may offer an extended mortgage holiday allowing you to defer payments until your finances are back in the black. Banks allow clients to make hardship applications and currently, there are Covid-19 support packages that may be suitable for your situation.

Ask the bank if any of these are options are available for you.

2. Talk to a mortgage broker or bank about refinancing

In New Zealand interest rates have dropped and refinancing may be a viable option. You need to determine the fee charged for breaking a fixed mortgage contract and decide if lower payments are better than paying the fee.

There is a handy mortgage break fee calculator here.

3. Review your budget and complete debt situation

When someone requests help from the Debtfix Crew we review their complete financial situation. This includes looking at all living expenses – from the essential to the frivolous, and all debt – from a small buy now pay later loan to mortgages.

Business debt may also be included because it will impact on your personal financial situation. The Crew also needs to know your income from all sources.

Once all the information is collected, it may be possible to identify some budget tweaks that make it possible to meet your mortgage repayments.

4. Consider selling or downsizing your home

Selling your home can be a difficult choice to make but it could be necessary to achieve financial stability and give you peace of mind. Downsizing or trading down your home may be a short-term action that generates a better long-term outcome.

5. Don’t borrow to pay your mortgage

It may be tempting to take a small loan from a high interest lender to cover a couple of mortgage repayments, but the long-term outcome is expensive. You will pay significantly more in interest than your mortgage costs you and it will potentially add to your financial woes.

As we always say at Debtfix - there is a solution, we just have to find it.

Breaking down the difficulty of mortgage repayments into smaller achievable goals will soon have you smooth sailing back to financial stability.