Selling your home - Mortgage stress

Mortgage stress logoConsidering selling your home is the hardest decision. You need to consider selling your home if you cannot afford your current loan repayments and will be unable to afford them for some years to come. 

If you decide to sell, you need to give yourself as much time as possible to sell your home and get a good price for it. You need to consider making this decision as early as possible (and preferably before the lender starts legal proceedings) because:

  • it is better to sell your home yourself, rather than have the lender sell the home for you,
  • you are more likely to get a better price for your home and avoid lots of legal costs if you sell your own home. 

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:

  1. 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.
  2. 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.
  3. 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):

    1.  A copy of the contract with your real estate agent.
    2.  Evidence that you are advertising your home.
    3.  The front page of the contract of sale.
    4.  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:

    1.  You are in financial hardship.
    2.  You will make regular repayments of what you can afford until the home is sold.
    3.  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).
    4.  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).

    Disclaimer

    The information displayed on this page is provided for information purposes only and does not constitute legal advice. If you have a legal problem, you should see a lawyer. Legal Aid Western Australia aims to provide information that is accurate, however does not accept responsibility for any errors or omissions in the information provided on this page or incorporated into it by reference.