Financial circumstances may change in an unexpected way. Common events that can result in a major fall in income include unexpected loss of employment, a relationship breakdown, or prolonged illness. If you fear that you may be unable to meet monthly loan repayments it is generally best to discuss the situation with the lender, and depending on the circumstances request a repayment ‘holiday’. The holiday means that the lender will not attempt the usual monthly repayment debits and the loan interest will be capitalised to the loan principal until the holiday period ends.

If the situation is such that even a holiday will be insufficient, such as permanent injury, the next best option may be the sale of the property. The lender will normally allow for this process so long as they are updated about the progress. The lender will likely issue a default notice under the loan agreement to protect their legal rights in case the owner does not proceed with a sale as agreed.

If the defaults continue despite the above efforts at an amicable resolution, the lender will make an application to the state Supreme Court to get orders for the sale of the property by the mortgagee in possession (lender). If the court orders are granted, the owner will also be ordered to vacate the property to enable the sale. The lender has a good faith duty to sell the property at market price so that any equity is returned to the owner at the settlement of the sale.

If the unexpected happens, the management of the relationship with the lender becomes critical and may well determine the final financial outcome for the property owner. If you are experiencing difficulties with loan repayments, we can provide advice about different options and manage the lender relationship to ensure that the owners equity interests and rights are protected.