Home Loan Lender

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A Home Loan Lender Can Foreclose On Your Home!

Home loans have incredibly attractive low interest rates in comparison to a consumer loan or a credit card. With homeowners benefiting from huge surges in house prices, we are living in a home equity rich society. A multitude of home loan lenders are capitalising on this by increasing awareness of home equity loans and home equity lines of credit. But homeowners should be aware that if you default on the loan, you can lose your home.

A home loan is a secured loan. This means that the home loan lender will secure the money they lend you against collateral. 99% of the time, this is your home. If you default on your loan by missing payments, the home loan lender has the right to foreclose on your home and sell it to try and recoup their losses.

So what should you do?

Don't get in difficulty in the first place!

Before you take out a home equity loan or home equity line of credit, sit down and work out if you can afford an extra monthly payment. If you will be using a home equity loan to consolidate other debts, then it could reduce your monthly outgoings considerably. If you are just going to get a home loan lender to give you a loan to increase your debt, then you are playing with fire. Be sensible and talk to a variety of home loan lenders about how much they would be willing to lend and what monthly impact this has. If you cannot afford a home equity loan, do not take one out.

Talk to your lender

If you have a home loan and are finding yourself unable to make your monthly payments on top of your mortgage, talk to your home loan lender immediately. You may be able to come to an arrangement whereby you reduce the monthly payments, reduce the interest rate or take a payment holiday to enable yourself to reorganise your financial commitments. The sooner you talk to them, the more lenient they are likely to be.

Take out a refinance mortgage

Another option is to take out a refinance mortgage on your property to include any remaining equity. You can then take cash out at time of refinancing to pay off the loan from your home loan lender and any other debts you may have. This will leave you with a clean slate, your home in tact and far less outgoings than previously. You can probably benefit from a low mortgage rate in the process too.

It is likely that if mortgage interest rates continue to climb, house prices continue to rise and homeowners continue to take out home equity loans, more and more people will get into financial difficulty and face foreclosure. Although foreclosure rates have stabilised at present, it feels like we are on the brink of financial disaster. Homeowners should only approach a home loan lender if they are absolutely sure that they can afford to risk losing their American dream, if they cannot pay it back.