Mortgage Repayment overdue - what's the process?

ozbargaingal on 30/07/2018 - 20:36

Hi Guys,
I'm 2 years into a 30 year IO (atm) mortgage. There has been 2 instances during that time where I've needed an extra couple of days to make a repayment and line-up our paydays. Both times I've let the bank know in advance and it hasn't been a problem. What I'd like to know is how long can you go before the system picks it up, or you get contacted..? Has anyone had any experience with this? I've dropped in a couple of times to the actual bank and I can't get a straight answer from them. I've been told that if it's a couple of days "you should be fine..?" Given how important it is, i'd like to know what the actual process is. Does anyone know what the policy is? Or where I could go to find it?

TIA

Financial

Comments

  • jjjaar on 30/07/2018 - 20:39
    +12

    Why don’t you talk to the bank and see about changing your repayment date so that it’s not always two days too early. The first repayment after the change may be higher to account for the extra two days, but this should be able to be accommodated.

  • CyberMurning on 30/07/2018 - 20:45
    +8

    Probably not really ready to commit to mortgage…

    What if interest rate doubled?
    What if there is some emergencies coming up?

    I won't commit unless I already have 6 months worth of mortgage repayments, ready in cash in the bank.

    • HighAndDry on 31/07/2018 - 12:06
      +7

      Don't know why you're being negged. OP is literally paycheck-to-paycheck on her interest-only mortgage repayments. And it's only 2 years in, in the midst of a falling property market with factors likely to increase rates in spite of said falling market.

      Also OP's attitude of: "I don't want to know how I can actually repay on time, I want to know how many days late I can be."

      Doesn't really bode well.

  • ozbargaingal on 30/07/2018 - 20:50
    -1

    Yeah, thanks for the comments but I'm not asking how to change the situation I'm asking if anyone knows the policy or how i can find out the policy.

    • boomramada on 30/07/2018 - 21:03

      Its not good to miss payments, perhaps talk to the bank and arrange a interest only loan?

    • tomsco on 30/07/2018 - 21:05
      +1

      It's probably not a policy they would advertise publicly because then heaps of people would be stretching the limit of it.

      With the new positive credit reporting, you would want to be careful that you're not being reported for late payments.

      • ozbargaingal on 30/07/2018 - 21:14
        -3

        Hi tomsco, exactly. I'm just after someone to tell me that after x days, a warning is issued, and after xx days you are then reported for late payments, etc. I feel like i'm asking a simple question about policy and no one actually knows.

        • Godric on 30/07/2018 - 21:27
          +1

          Simple question yet you don't know huh?

          There's a reason why it's like that.

        • bobbieb on 30/07/2018 - 21:27
          +6

          Like @tomsco said, no financial institution is going to publish their internal policies.

          In all likelihood, any communications you receive from your bank are going to be courtesy reminders. However, rest assured, the fees, penalties, etc in your contract will be automatically applied once whatever small grace applies lapses.

          The first formal communication you'll receive from the bank is likely to be a we're about to write your debt off and hand your case over to their collections and/or hardship teams.

        • HighAndDry on 31/07/2018 - 09:50
          +11

          Assume it's 0 days. Don't plan to be late on your f******** mortgage repayments.

      • onevstheworld on 30/07/2018 - 21:44

        @tomsco
        Didn't the old credit report system already pick up negative incidents? My impression is the new system is meant to also reward good behavior instead of purely penalizing bad.

        You're not notified when you get a credit strike, so OP potentially has several strikes to his credit report already.

    • kingmw on 30/07/2018 - 21:07
      +3

      You can avoid this problem with having one repayment buffer in your account. Also will save you the hassle and stress of this.

      Not sure how many days the bank gives you but likely < 7 day buffer. Also some banks may charge a fee for late repayments especially if they have to chase it.

      This also affects your credit score (with the new scoring system)

      • ozbargaingal on 30/07/2018 - 21:23

        thanks kingmw, where are you getting this information from?

        • kingmw on 30/07/2018 - 21:32

          This is a guess as I am probably extrapolating from rental agreements (which is about 14 days in arrears).

          Don't have any documents/links that state it is 7 days but I pay my mortgage fortnightly so I assume about 7-14 days for mine.

    • chumlee on 30/07/2018 - 21:10

      Does it mention anything in your contract

      • ozbargaingal on 30/07/2018 - 21:14

        No chumlee, I went there first before I dropped into the bank.

    • HighAndDry on 31/07/2018 - 12:12
      +1

      I'm not asking how to change the situation

      Considering your situation is:

      I've needed an extra couple of days to make a repayment and line-up our paydays.

      You should be asking how to change the situation.

  • Ace Ventura on 30/07/2018 - 21:05
    +1

    I remember about 12/13 years ago, my younger brother missed about 6 months of payments. When he returned to work, the day after his first pay packet, the bank had taken his total pay. System saw money in the linked account, and automatically took it.

    He ended up having his pay put into a different account and would transfer enough into the linked account to cover his current expense and pay off the behind amount. After about 4 or 5 months he had caught up (no other real expenses, decent pay in the mines.)

    Funny thing was that the bank never contacted him once about the arrears. He's purchased a couple of properties since and seems it hasn't effected his borrowing potential. Mind you, this happened back when banks were offering 100% finance, no deposit, so they may have seen more value in keeping a client than selling it out under him.

    • ozbargaingal on 30/07/2018 - 21:17
      -1

      6 months is a long time! I'm just reading now that moneyhelp.org.au says after you’ve been served a default notice the timeframe the lender takes to sell your home could be as soon as after the 30 day period. ouch!

      • HighAndDry on 31/07/2018 - 12:07
        +1

        There's no "ouch" if you don't default.

    • autolux on 30/07/2018 - 21:56

      funny how they do this, but if it was say a farmer, he'd be instantly sold up and out on his ass…

      the (profanity) banking industry is why this country is in a toilet.

      • HighAndDry on 31/07/2018 - 12:08

        The banks (NAB?) are getting a lot of heat for foreclosing on farms when the farmers couldn't repay - but it's a business. The farmers took out those loans - they would've had to sell the farm without the loan anyway.

  • garetz on 30/07/2018 - 21:51
    +1

    Usually its until the next payment is due, and then you have a default logged on your account, if you miss 3 payments then they can foreclose your loan. Usually they contact you first, and ask you to clear outstanding debts, it just depends on who you are with, and how on top of things they are.

    • ozbargaingal on 30/07/2018 - 22:37

      thanks garetz, this is the type of info I was after.

      I was asking out of interest, really. Anyone else find it odd that for such an expensive, significant purchase the consumer rules around are so grey? Lots of people talk about suburbs being in 'mortgage stress' and I wondered what these people were experiencing. Obviously the best thing is to try to avoid going into arrears as best you can.

      • garetz on 30/07/2018 - 23:01
        +1

        Its basically cause the banks dont want you to know, most mortgages are contracts that allow the bank to do whatever they want, there has been cases where someone never missed a payment, and the bank still foreclosed the loan, because it was more financially beneficial for the bank to do so.

      • HighAndDry on 31/07/2018 - 12:09
        +5

        Anyone else find it odd that for such an expensive, significant purchase the consumer rules around are so grey?

        It's not 'grey' at all!

        Your repayment date is your repayment date. After that, the Bank has their legal rights, but will exercise discretion. You don't have any rights to be late by a set number of days - you're supposed to pay on time.

  • Nice one baby on 30/07/2018 - 22:33
    +7

    I worked for a commercial UK bank a few years ago. A bit different than consumer loans but heres what happened there. Everyday the Credit Risk Control team ran reports for any loans than were overdue. Every overdue loan was investigated and the Relationship Manager was contacted to ask why the account was overdue. The Relationship Manager either already knew why it hadn't been paid or they rang the client to find out why. Once a reason was known (or not known) a Credit Risk Officer would determine if it was acceptable. If it was then the overdue loan would be monitored until the date approved by the CRO.
    TLDR a Credit Risk Officer will probably decide depending on how much of a risk they think you are. This will be influenced by how large your loan is, what the security is, the current house market, interest rates market, what the banks current books look like and your past history.

  • pjcook on 31/07/2018 - 07:55
    +3

    The credit reporting system changed a couple of years ago where financial institutions can choose to report borrowers who are consistently late in their payments. I am not sure how many are doing this but I would not be testing the system to find out.

    My suggestion is to get your shit together, talk to the bank about your sue date, ideally get a payment in front and do not get into the habit of gaming the system to get the system. The only thing you risk is your credit record which can impact you in all aspects of your life.

  • HighAndDry on 31/07/2018 - 09:49
    +1

    What I'd like to know is how long can you go before the system picks it up, or you get contacted..?

    Assume it's 0 days and you'll be fine. Why the **** are you looking for how long you can be overdue paying your mortgage? You're just asking for trouble at that point.

  • Micko179 on 31/07/2018 - 10:09
    +1

    Ummm, more concerning is why you're looking for how late you can be?! I was of the opinion that 'most' people wish to pay these out EARLIER rather than later as do I. While I've always been way ahead on my 'actual' loan (around $50k) I regularly get behind on my 'weekly' repayments due to lack of regular weekly/monthly etc income & therefore pay in lump sums when I get them (& redraw if needed).

    If I deposit funds into the direct debit account associated with the mortgage it's always taken the following day as I'm always mostly $3-5k 'behind' on that side of it but way way ahead in terms of $ amount owing if that makes sense. My bank gave me a substantial credit card ($20k) which I almost always pay in full every month to take advantage of the no interest period so I'm assuming my credit rating is pretty good with them. 'touch wood'

  • HeWhoKnows on 31/07/2018 - 14:11

    Depends on your repayment cycle.
    If its monthly then a couple of days is not a problem

  • suti on 31/07/2018 - 14:23
    +1

    Good luck when your IO expires.. if your cross your fingers hard enough you will be able to find another IO with your existing bank at the same or lower rate so you can kick the can down the road a bit longer.

    In reality, your existing bank will note your poor credit record and refuse you another IO loan and you will automatically rollover into a P+I at a higher rate and you will have to find more money for the loan. Other lenders will also look unfavorably at your case, in any case, it sounds like you are mortgaged to the hilt and you probably won't meet a 6:1 loan to income ratio.

    Welcome to the great Australian IO refinance cliff. Thanks for speculating in Australian property. It only ever goes up.

    • stirlo on 06/08/2018 - 11:35
      -1

      Welcome to the great Australian IO refinance cliff. Thanks for speculating in Australian property. It only ever goes up.

      BURN!!!

  • CandyMan on 31/07/2018 - 18:22

    TLDR ask them to adjust your due date a few days permenantly on the system

  • miwahni on 31/07/2018 - 21:46
    +4

    My information is nearly five years out of date, not sure if anything has changed - I spent 21 years as a lending manager with one of the majors but left late in 2013. Of course this may not hold true for all banks but it was the process where I worked.

    Firstly, as soon as you're one day late, your repayment history changes from A to B for that month. Nothing will be done at that time, but if you come in to borrow more money / swap from IO to PI etc and you have more than two Bs in the last 12 months, forget it. Need to clean up that repayment history first.

    When your repayment is seven days late, the phone calls start. If it gets to fourteen days late you are sent an arrears letter, and an arrears fee is charged to the loan (used to be $50 but I think that it was lowered a couple of years ago). If the repayment is one month late then you'll get a letter of demand. After that the details are passed from Collections to Legal who will follow it up from there. By the time it's three months overdue you'll be threatened with foreclosure, and legal costs will be charged to the loan. It used to take about six months of non payment before eviction, and subsequent listing for sale. From the first missed payment through to actual sale can take up to nine months, and all that time your loan balance is growing, with accrued interest and legal fees being added. Banks have a duty to achieve the best sale price possible (ignore the myth that they only look for what they're owed, that's a fallacy) especially as agents' fees etc then need to come out of the sale price. If there's anything left over after the sale, it will go to the borrower. But if the loan was particularly high loan/ value ratio there may be nothing left, and in some cases you will still end up owing the bank money after the sale. Unlike the USA, Australian mortgages are not non-recourse, meaning that the sale of the asset doesn't extinguish any remaining debt.

    If you borrowed more than 80% of the property value in the first place, in all likelihood the bank would have taken out mortgage insurance (and charged the premium to you). What this means, is that if there is a debt owing after the sale, then the insurer will pay the rest of that debt out - and then the insurer will chase you for the money as it becomes their debt instead.

    If you borrowed less than 80% then in most instances the loan won't be insured, in which case it's the bank that will continue to chase you for the money.

    All financial institutions have a hardship team so if your circumstances are ever changing, call them up and talk to them. They can help with restructures, lowered or no repayments for a period etc. The very worst thing you (the generic "you", not OP) can do is ignore the problem and hope it goes away, because it won't. It feeds on your lack of attention.

    • ozbargaingal on 03/08/2018 - 23:44

      Thanks for taking the time to reply miwahni. This is the kind of detail I haven't been able to find anywhere.

      Luckily I don't need to worry about this process for the foreseeable future, however the overwhelming message seems to be to have a substantial amount in your mortgage account and communicate with your lender should your circumstances change.

      Thanks for shedding some light on the process everyone.

Login or Join to leave a comment
Login Join