Selling your home - Mortgage stress
The decision whether to sell your home is most difficult when you are hoping that you can make the loan repayments soon, but you don’t know when this will happen. The problem is that as time goes on, things are going to get worse and you will get further behind on your loan repayments and add lots of extra interest.
In these circumstances, you could:
- Make a repayment arrangement with the lender for a realistic amount of time, for example, 6 months, or whatever you can negotiate with your lender.
- If you still cannot make the loan repayments at the end of that period, you may need to consider putting your home on the market.
- If you do then decide to sell, you will need to go back to the lender and negotiate a further repayment arrangement on the basis that you are selling your home.
It is never too late to ask for time to sell, but the lender is less likely to agree later in the enforcement process. If legal proceedings have already started, enforcement costs will be added to the amount you owe to the lender.
What if my home is worth less than the amount of my loan
If the amount your home sells for is less than what you owe the lender, the shortfall will still be owed to the lender. If you think your home may be worth less than the amount you owe on your home loan, get legal advice.
I’ve decided to sell my home. What do I do now?
Step 1 - Place your home on the market
You need to:
- place your home on the market, and
- price the home realistically so that it will sell but for the best price possible in the circumstances.
If you are using a real estate agent, you should explain how long you have to sell the house. This will usually be within 6 months, but could be less than 3 months, depending on what arrangements you are able make with your lender.
Step 2 - Tell your lender
You need to give copies of evidence that you are selling your home to the lender. This evidence should include (where available):
- A copy of the contract with your real estate agent.
- Evidence that you are advertising your home.
- The front page of the contract of sale.
- Your marketing plan for selling the home.
Step 3 - Negotiate a hardship variation with your lender
You are asking to change the repayment arrangement on the basis that:
- You are in financial hardship.
- You will make regular repayments of what you can afford until the home is sold.
- You need a reasonable time to exchange contracts for the sale of your home (ask for 6 months, but you may need to consider agreeing to only 3 - 4 months).
- Your loan will be repaid when the home is sold.
Step 4 - Tell the lender if you accept an offer
If you accept an offer from someone to buy the house, you need to notify the lender as soon as possible and provide evidence of the contract of sale. You will need to arrange for the mortgage to be discharged in order to be able to transfer ownership of the house to the buyer at settlement.
Changing your mind
If you get a job, get well, or get a large lump sum of money before your home sells, you still have the option of trying to:
- negotiate a further arrangement on the basis you can now make repayments, and/or
- repay the loan (although this will be more difficult if the lender has already obtained a court judgment).