New Zealand is in a terrible position in terms of the real estate market. People have been over spending in the last few years as explained in the previous post. But this is about to come to head. The financial hard times are starting to catch up with us and this will be starting to hurt the real people on the ground. As people Mortgage holidays come to an end and the economy hasn’t allowed for new employment opportunities and there is even less money to be spent on the mortgage. This is causing people to lose their properties to their lenders.
Mortgagee sales are soaring, with one expert predicting almost 10 homes a day will be taken by banks. With mortgagee sales predicted to hit 250 a month, struggling homeowners are being urged to front up to their bank manager.
Tell the bank you are in financial strife before you miss a payment, It’s harder to turn the situation around when it’s extreme. Without a rescue plan involving the bank, people risked having their home sold from under them and losing all control over their financial assets.
James Young of Auckland University real estate research said people paying a high proportion of their income in mortgage payments – usually first-time buyers – were most vulnerable to mortgagee sales, as were those who had lost their job or had their hours cut.
There are ways homeowners could stay in their properties depending on how much work they wanted to put into it, and lots of options providing you put your hand up and say you need help.
If you go to ground, you give the bank no choice but to throw the book at you. Once a bank started issuing Property Law Act notices, it generally didn’t back-pedal. Struggling homeowners had to go through a “raw process” of confronting their financial situation and “telling all” before they could work with the bank.
“The idea of someone selling in a depressed market and walking away still owing money is the worst possible outcome. The best possible outcome is that they can get to a position where they can manage their debt and get through until the market or their personal circumstances improve.”
Banks were not working with budgeting services quickly enough, instead they were threatening homeowners with losing their homes. What we need is less panic and more dialogue – the banks just have to be a lot more reasonable.
A Christchurch couple had owned their home for seven years and reduced their mortgage to just 60 per cent of their home’s value when the company one of the couple worked for folded in November last year. They approached their lender, Sovereign, and asked for a three-month mortgage “holiday”, but Sovereign wouldn’t play ball.
Three months later, Jay landed a new job but by then the couple had fallen behind on their mortgage payments.
They put as much as they could towards their mortgage but didn’t talk to their lender again, and were served with official documents advising them that they were facing an imminent mortgagee sale.
This situation is typical and if you don’t clear the arrears before the property goes to auction you will most likely lose it.
* Five steps to halt a mortgagee sale
Call the bank and ask to be sent a budget sheet and statement of position form. Make an appointment to go and talk about your finances, giving yourself enough time to see a mortgage broker and prepare a proposal for managing your situation first.
Contact a reputable budgeting service. There are more than 200 free budget advisory services around the country. Ask whether an adviser can accompany you to the meeting with your lender.
Put on paper how much money is coming into the home and what the true values of the outgoings are, and put a workable budget plan into action.
Look at ways of boosting your income – through part-time work or taking in a flatmate.
Be honest and open with your bank and your advisers.