budget living

How to save your home

Wednesday, April 29, 2009

— with financial expert Adrian Raftery

If you're facing repossession, the first thing to know is that you can get help from various organisations, free. The threat of losing your home is a harrowing experience, but you have to act immediately, or the problem will only grow worse.

What to do

When the repossession notice arrives, the first thing you should do is talk to your bank and immediately ask for lower repayments if you haven't already done so. Take in a budget so you can prove how you'll meet the new payments. Remember, they would rather have some repayment than none.

  • Talk to a free adviser immediately. Below is a list of places that you can contact for unbiased free advice. They won't make judgment on you; they simply want to help you. Don't suffer alone.
  • Whatever you do, don't just stop making repayments. A crucial point when dealing with banks is to show a good payment record. Banks are more likely to be accommodating if you haven't missed payments.

What not to do

  • Don't try to re-finance at a higher interest rate. Interest rates are high enough already and they are probably what got you in trouble in the first place. Repossession is inevitable if you do this.
  • Avoid those willing to buy your house. There are profiteers who can sniff a distressed borrower a mile away. They are not doing you a favour.
  • As much as possible you need to try to preserve your credit rating. It is the most important part of your financial stability. Having a negative credit rating can impact on your future ability to borrow/extend credit and even negotiate things like car insurance.

"It happened to me"

“Last year my husband and I lost our home, simply because we couldn't afford to repay our mortgage. My husband's job was going well so we got a $195,000 mortgage on a $250,000 home in Melbourne. Money was tight but we coped.

“Then, two weeks before our first baby was born, Mac lost his job. We had a small savings account so we knew we would be OK for a few months, but he had trouble finding work.

“Soon we were three months behind paying the mortgage and everything snowballed. After we'd missed another two mortgage payments, we were given a notice of foreclosure. It was humiliating. We've now moved in with my mum, and Mac is working part-time for a very low wage. I've gone back to teaching. We've gone from home owners to nothing in six months.”

Where to get help

Commonwealth Financial Counselling (CFC)
There are 41 Federal Government-funded organisations that provide free financial counselling services to people experiencing personal financial difficulties, including due to circumstances such as unemployment, sickness, credit over-commitment and family breakdown. www.facsia.gov.au/internet/facsinternet.nsf/family/cfcp-cfcp_directory.htm

Financial Information Service (FIS)
Centrelink's FIS is an education and information service available to everyone in the community.

FIS helps people make informed decisions about investment and financial issues for their current and future financial needs. FIS is independent, free and confidential and provides services by phone, personal interview and through seminars.

Department of Fair Trading or Consumer Affairs
They can help you get a court order if you are experiencing financial difficulty and arrange a new repayment schedule if your lender isn't willing to negotiate a new plan.

State Financial Counsellor Associations
NSW www.financialcounsellors.asn.au
Qld www.fcqn.asn.au
WA www.financialcounsellors.org
SA www.users.bigpond.com/safca
Vic home.vicnet.net.au/~vafc/
Tas www.anglicare-tas.org.au

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