Mortgage loans are taken for the long term. It is almost impossible to predict your own financial condition for 20-30 years ahead, therefore, situations often arise when debt repayment begins to cause difficulties for the borrower. What to do in such situations, what are the ways to solve this problem.
What is the threat of non-payment of the mortgage?
Lenders accept good collateral as collateral for mortgage loans: the acquired real estate, the market value of which is at a high level and tends to grow steadily. By doing this, banks reduce their own risks of the transaction.
The borrower, when pledging property, must understand that non-payment of the loan may lead to the fact that the property will be seized by the lender and sold in order to pay off the debt.
You should not think that banks will withdraw collateral immediately after the first day of delay. The bank is not interested in this outcome of the transaction, the borrower will be offered various ways out of the situation: debt restructuring, refinancing, credit holidays, etc. This will be possible if the borrower really has objective reasons for untimely debt service when he contacts the bank and the lender sees his desire to pay off the loan.
Measures applied by banks prior to the sale of collateral:
- Calculation of fines, penalties, penalties;
- Submitting a claim for debt repayment;
- Bringing guarantors and co-borrowers to responsibility under the agreement;
- Sale of debt to third parties.
- The choice of the option remains with the borrower, in agreement with the lender.
Restructuring
Debt restructuring refers to the re-execution of the terms of the loan agreement in favor of the borrower. It is produced by the lender. To implement this method, good reasons are required: the borrower’s loss of work, a protracted illness, due to which incomes have significantly decreased, etc. All reasons must be documented and justified.
Restructuring takes place in different ways :
- Prolongation of the final loan maturity;
- Establishment of a loan vacation, when at a certain period of time the client pays only interest for using the loan;
- Transfer of the contribution amount for 1 month to the next period;
- For verified clients, it is possible to reduce the interest rate.
- Sometimes banks offer to restructure open arrears, but more often the condition for restructuring is positive credit history.
Refinancing
Refinancing a mortgage means re-issuing a loan agreement on new terms with the same or another lender. Refinancing is carried out according to the scheme for issuing a new loan: the client must prove his solvency, he must not have open delays.
The programs operating in banks aim at increasing the loan portfolio, attracting new clients with solid collateral. It is proposed to reduce the interest rate and monthly payment, combine several contracts into one for ease of service, etc.
Sale of property
To get help with bankruptcy, selling the property has been the last option that most people choose. If the borrower finds himself in a desperate situation, the debt can be repaid by selling the collateral.
Implementation by agreement of the parties. The lender and the borrower draw up an agreement on the sale of the pledge, determine the material parties to the transaction: price, method of settlement, timing, etc. Tenders are held.
As a result, the profit from the sale is distributed between the parties to the transaction: for the full repayment of debt and interest, the balance is transferred to the borrower.
Other options
You can analyze your own expenses, try to reduce them, refuse some paid services, reduce spending on recreation and entertainment. As a result, the borrower will of course be limited in his usual living conditions for some time, but he will remain in the ownership of the property.
The borrower can independently declare himself bankrupt if, in the presence of a large amount of debt, he does not have sources of repayment. The creditor himself may initiate the bankruptcy proceedings against the debtor.
