When you have a home loan, the house is held as security. This means your lender can repossess and sell the house if you fail to make payments according to your loan contract.
If you fall behind in your mortgage payments or think you are about to fall behind, it’s essential that you keep your lender informed about your circumstances, ask them for a hardship variation and tell them the steps you are taking to keep up your payments.
If you fail to keep them advised about your circumstances, they will eventually start action to repossess your home.
When can a lender respossess your home?
You should contact your lender early and apply for a hardship variation to your loan during this period because a lender can commence legal proceedings to take possession of your home if:
- you are in default of the mortgage by failing to pay a single instalment; and
- they have served you a default notice in writing requesting payment according to the loan agreement; and
- you have not made the required payment within 30 days (or the time specified in the notice), or you miss another payment within that 30 days.
You must act quickly because the timeframes for your lender to enforce its mortgage by selling your house are quite short.
If your lender refuses to grant you a hardship variation (or one that will meet your needs) or issues legal proceedings against you, you should apply for a hardship variation for your home loan urgently with the external dispute resolution scheme to which your lender belongs. All lenders of consumer credit must belong to either the Credit Ombudsman Service (COSL) or the Financial Ombudsman Service (FOS). The effect of lodging a complaint is to stop legal action while the complaint is being considered. If a court has already made an order against you, it is too late to apply to an external dispute resolution scheme..
For legal advice, contact Consumer Action Law Centre on 1300 881 020 or 03 9629 6300 or email firstname.lastname@example.org
Method of sale of house from mortgage default
If you have not reached an agreement and your lender wants to enforce the loan conditions it can commence legal proceedings to repossess and sell your home by either auction or private sale.
- must exercise the power of sale in good faith, having regard to the interests of both parties;
- must take reasonable steps to obtain the best possible price consistent with its right to realise the security;
- must sell the property as and when it chooses to claim the security; and
- must require you to move out of the premises.
Note that lenders will charge you all sale and legal costs incurred during court action, repossession and sale.