Skip to main content

How to Avoid Home Mortgage Loan Default

You have been paying your home mortgage loan diligently and on time, but lately you've been experiencing a cash flow problem.  This may be due either to a job loss or a sluggish business. 

And so the question is: What should you do if you find yourself unable to service your loan? Can you default (not deliberately, though) and still avoid the auctioneer's hammer?



How to Avoid Defaulting on your Mortgage Repayments

If you find that you cannot meet your mortgage repayments or you are worried you might fall behind, the first thing to do is contact your lender as soon as possible. Lenders have procedures for tackling payment difficulties and they'll try to help.

Depending on your payment history and whether your difficulties are likely to be long or short-term, your lender might agree to reduce your payments for a period of time, charge you interest for a while, give you a payment holiday ( a temporary break from making an repayments), or even extend your mortgage term to reduce your monthly payments.

Sometimes after falling behind and trying to 'make a comeback', you might find that servicing mortgage arrears is burden-some. You may need to request the bank for debt restructuring to deal with that.

Debt restructuring simply means that you draw out a new loan to pay the old loan. The bank will close your old loan with them and set up a new one. And given the high level of competition in the banking sector, most banks nowadays are open to the possibility of debt restructuring.

Note: Default rate is high among the first-time homeowners because they usually have little understanding of the dynamics of how a mortgage works.Unfortunately, hiding or running away when you start falling behind in your repayments under the misconception that banks/lender are only keen on getting money from you is NEVER the solution.

Other options  available in case you default due to a change in your financial circumstances especially for people who have lost their jobs is taking a retrenchment insurance cover that pays mortgage for up to nine months for those who have lost their jobs. This allows such people to either get another source of income or make an informed decision about the next step to take regarding their home.

This insurance cover sees to it that the most important asset of your life and symbol of security is not pulled from under your feet just because you have lost your jobs.

If you do not get another job or source of income that will enable you continue with the repayment even after the nine months catered for by the retrenchment cover, you can choose to sell your property by private treaty (at the open market price), pay off the loan balance, and keep the rest, which include the capital appreciation realized over time.

You can use part of what remains after clearing the balance to buy a cheaper house. If you wait for the bank to auction the house, you will not get any proceeds from it because the lender is usually only keen on recovering the outstanding debt and will, therefore, not have a problem selling it below the market price.

You can also use your pension savings up to 60% of accrued retirement benefits to offset outstanding mortgage loan in case and you're unable to service pay back. With this new law, particularly in Kenya. You can now access credit up to 110% of the value of the home. Ordinarily, financing was up to 80% of the value of the property, leaving you to to raise the remaining 20 per cent plus closing cost estimated at 10% of the value of the home.

For instance, for a home worth Sh8 million, the lenders will ordinarily finance you to the tune of Sh6.4 million leaving you to raise Sh2.4 million to cover the deposit and closing costs including stamp duty (Sh320,000), legal and other closing costs (Sh480,000).

By using your pension savings, you can be financed up to the tune of Sh8.8 million, removing the need to raise any funds as long as 60 per cent of the accrued retirement savings can guarantee the Sh2.4 million required.

The bottom line is that it's your responsibility to track you repayments and interest rates to get as much information as possible about your mortgage to enable you explore these available options. You only need to be well-informed and you are safe.

Comments

  1. Be pro-active. Don’t just apply and wait for a call. Get on the phone every few days to check the status of your application. This could be the difference between keeping your home and losing it so make a nuisance of yourself if you have to.

    ReplyDelete
  2. If you can no longer afford to make your monthly mortgage payments, it is certainly crucial to get things settled out as soon as possible to avoid default. There are many possible solutions available for homeowners having difficulties with their current mortgage payment. Don't just walk away from the mortgage. Talk to your lender about a loan modification or refinancing to protect your home from being lost.

    ReplyDelete
  3. Contacting a lender to avoid having default on the mortgage payment is certainly a good advice. They have the best knowledge regarding this matter.

    ReplyDelete
  4. Great post . It takes me almost half an hour to read the whole post. Definitely this one of the informative and useful post to me. Thanks for the share.Best Home Mortgage Lenders Fort LauderdaleFederated Mortgage Services can match you with the best Florida mortgage financing programs from hundreds of lenders.






    ReplyDelete
  5. Thank you for sharing valuable information. Nice post. I enjoyed reading this post. The whole blog is very nice found some good stuff and good information here Thanks..Also visit my page.Fort Lauderdale Mortgage Loans As a premier Florida mortgage lender, Federated Mortgage Services can match you with the best Florida mortgage financing programs from hundreds of lenders.

    ReplyDelete

Post a Comment

Popular posts from this blog

How to Verify Your Land Title Deed is Genuine

Cases of forged title deeds are on the increase. Therefore, people are losing money to con men as they are taken advantage of due to their ignorance regarding land transaction matters. While thinking of owning land, it is vital to be aware of how you can verify a title deed before investing your hard earned cash.

As you plan to commit your money to buy and construct your dream home, verify that, the seller is the genuine owner, the land exists and is free from restrictions. Also be sure that you are not buying land on a road or railway reserve and above all, that the title deed is genuine.

How farmers can double their bean yield production

"As Jack slept, the beans germinated in the soil, and by morning a big beanstalk grew in their place. When Jack saw the great beanstalk, he immediately decided to climb..." This is a classic scenario of 'Jack and the Beanstalk' fairy tale. The same is true for Kenya's bean variety that climbs and spreads on sticks producing double the yield of local varieties.

Due to subdivision of land in Kenya, farmers are not able to produce enough beans to feed the 38.6 million people living in Kenya.This is mainly due to shrinking land sizes. This is the reason why high yielding varieties of beans that only need a small area to grow has been developed. These new varieties of beans require support with stakes (sticks) to climb on when they are growing.


The beans can grow up to a height of 3.5 meters. The long stems of this variety of beans enable it to produce more pods as compared to the normal bean varieties (bush bean).   With good management climbing beans can produce u…

Herbal Plants used for Alternative Medicine with no side effect

In a sad note, most indigenous informants keep herbal knowledge, especially the actual preparation methods, strictly secret. Luckily, an aged medicine man from Gatundu in Central Kenya, whose great knowledge of medicinal plants facilitated the write-up of this article.
In part one of this article, plants are grouped according to their medicinal use. According to the aged medicine man, simply boil the leaves, roots or the bark; add honey or milk or soup to sweeten the concoction. He recommends taking a glass in the morning and in the evening for preventive measures. 
He cautions on their medicinal uses which should be considered as neither preparation methods nor dosage prescription are provided. This is a topic that would require much more time and I have decided to leave it for part two of this article.
Best Herbal Plants for alternative Medicine with no side effects

I have grouped their medicinal uses in three parts which are,       Alternative medicine for preventive measuresHerbal …