While it’s great to understand the entire home loan process, it’s also important to be aware of the what can happen if you default on a personal loan. Be financially prepared so that you understand what it means and how it can be avoided. Here is the process as well as some tips to stop you defaulting on a personal loan.
First, what’s a mortgage default?
In summary, failing to keep up with your mortgage repayments 90 days or more behind due date is what’s considered a mortgage default. Fees for this can range between $9 to $195 depending on who you’re borrowing with, as well as adding interest to your home loan.
If you do get into a circumstance of defaulting on a mortgage payment, it’s important to be aware of the consequences. First, you will be required to pay a fee. Next, the default will be added to your credit file – affecting your overall credit rating. Finally, if the defaulting is continued and you cannot repay your loan, the bank will be forced to sell your property to reimburse the debt – however this is the extreme circumstance.
What can I do to avoid defaulting on my loan?
To be as cautious as possible and avoid defaulting on a loan, there a few steps that you can take to reduce your risk.
- Do your research and understand exactly how much you will be able to afford borrowing.
- Compare home loans – get a mortgage broker to find you the best deal at the time to save you money.
- Have an emergency fund – should your income flow stop for a period of time, having an emergency fund will take some stress off you. Aim for about three months worth of repayments so you that you have a good buffer.
Make sure you’ve set up a contingency/budget plan so that you can prepare for any circumstances that may arise over your home loan period.
If you already have a home loan and are worried that you might be at risk of defaulting, chat to our finance team now. Hunter Galloway will be able to assist you to figure out an effect course of action.
Hunter Galloway provide finance and home loans, chat to our finance specialists if you’d like a free assessment or more information. We can set up an obligation free catch up about your financial circumstances now.
Call us on 1300 088 065 or send us an enquiry via our website here.