Mortgage Stress: Should I Let the Bank Repossess and Sell My Property?

Mortgage stress is a growing concern for many homeowners, especially in today's volatile real estate market. As a homeowner, it is crucial to understand the various options available to mitigate mortgage stress and preserve your equity. In this article, we share a real-life example of a homeowner who faced mortgage stress and the unfortunate consequences that followed. We will also provide insights and recommendations on how to strategically sell your property and maximize your equity in such situations.

A Real-Life Example: Jane's Story:

Jane, a homeowner in Toowoomba, reached out to us in May 2022, seeking to sell her property quickly as she faced eviction by her mortgage lender within a couple of days. Upon reviewing the situation, we learned that the lender had filed a claim against Jane for the recovery of possession of property, which resulted in a default judgment against her. The lender then pursued enforcement of the judgment through multiple applications for enforcement warrants, including renewals of those warrants, which were granted. Despite wishing to take control of how her property is sold, Jane decided to give her keys to the lender instead of selling the property herself.

The Financial Consequences:

Jane had $250,000 in equity in her property and believed she would receive the remaining balance once the bank sold her home. However, as of the time of writing this article, the lender has yet to dispose of the property. The estimated value of the property has decreased from $385,000 in May 2022 to $375,000, resulting in a $10,000 reduction in equity. Additionally, Jane lost around $10,000 due to the accruing interest on her loan balance of $135,000.

If the lender takes another year to dispose of the property and interest rates remain at current levels, Jane will lose an additional $11,000 in interest, plus potential further declines in property value and any other costs the bank incurs.

The Cost of Repossession:

The cost of repossessing a property in Australia can range from $5,000 to $20,000 or more, depending on various factors such as the property's location, condition, and the legal and administrative costs involved. Banks are required by the Banking Code of Practice to sell repossessed properties as quickly as possible while obtaining the best possible price. However, there is no specific law governing the timeframe within which a bank must dispose of a repossessed property.

Become in control of your mortgage stress and your property sale:

Jane's situation illustrates the potential pitfalls of handing over the keys to the lender. With our Strategic Solution, we can help homeowners in similar situations explore alternative avenues to regain control of their property sale and maximize their equity.

Every homeowner's situation is different so we will take our time to understand your needs, wants and ideal outcomes and work with you to tailor the best solutions to your situation.

Until the property is disposed of by the lender, there is still something that can be done so that you are in control of your property sale. Don't hand over the keys to your lender, talk to us and let us work out a Strategic Solution for you.

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Disclaimer:

The information provided in this article is for informational purposes only and should not be considered financial, legal, or professional advice. The content is based on the author's personal experience, research, and opinions, and is intended to provide general guidance and insights. Every individual's situation is unique, and it is recommended that you consult with a qualified financial advisor, legal professional, or other experts before making any financial decisions or taking any actions based on the information presented in this article. The author and publisher of this article are not responsible for any errors or omissions, or for any actions taken based on the information provided herein.

Please note that "Jane" is a pseudonym used to protect the homeowner's privacy, and any similarities to actual persons, living or deceased, or actual events are purely coincidental.