Your rights under your Mortgage

Missing a mortgage payment does not have to mean you will lose your home.

This article provides a general overview of your rights and your lender’s responsibilities when you cannot meet your loan repayments.

I’ve missed a loan payment, what do I do?

The first step is to be proactive. Contact your lender and let them know you are aware of the situation. If you know in advance that you will not be able to make a payment, contact your lender ahead of time. The quicker you act, the more options you will have.

Lenders are aware that borrowers occasionally face financial difficulties and have specific departments that deal with missed payments and loan defaults. Remember, it is often in the best interest for you and the bank to resolve the problem while keeping the mortgage in place.

Each case is assessed on its own merits, however if your financial problems are short-term, you may be able to arrange to temporarily defer payments, extend the term of the loan, or refinance.

Most importantly, don’t panic. It is often preferrable to talk to your lender before considering high risk alternatives such as using credit cards or taking out further personal loans.

What rights does the lender have when I can’t pay my mortgage?

When you have a mortgage over your property, a lender often has a number of options available to them if you default in your loan repayments. For example, the lender may be able to sell the property to recover the mortgage debt and associated costs.

If the bank exercises its right to sell the property, and the proceeds to not cover the entire debt, the bank may also pursue you for the outstanding amount.

Other options available to the bank under the loan contract often include the right to charge a higher rate of interest when the account is in arrears, the right to charge additional fees, or pass the costs of chasing you for loan payments onto you.

What are my rights?

It is common for a lender to exercise its power of sale rights after a default continues for a period of a few months. However, the lender must ensure due process is followed before exercising these rights.

Generally, borrowers must be given formal written notice and allowed a period of time (commonly 30 days) to remedy a default before the lender is allowed to take any action.

If the lender does elect to sell the property, they must do so in good faith. This means that the lender must take reasonable steps to sell the property at market value.

A lender may be liable for loss suffered by you as a result of the lender selling the property in a reckless or careless manner.

How can Douglas Cheveralls Lawyers help?

If you are experiencing difficulty paying your mortgage, it is important to be proactive and up-front with the lender.

If you have received a default notice from your lender, you should seek legal advice as soon as possible. One of our experienced lawyers can help you to understand the process and ensure your rights have been protected.