Cultivate a relationship with your lender
Investors must cultivate and maintain relationships with their lenders, according to Jeremy Cabral, publisher of HomeLoanFinder.
In response to a HomeLoanFinder survey conducted this week that found 10 per cent of Australians have skipped a mortgage repayment, Mr Cabral told Smart Property Investment that investors must be extra careful when it comes to their relationship with their lender.
“Essentially, the biggest concern is your credit rating with that particular lender and your relationship with them, especially if you’re planning to go back to them for another loan,” said Mr Cabral.
“If you do know that you’ll need to skip a repayment, you need to communicate upfront and tell them the situation and try to arrange something that works for both you and them.”
The implications for skipping a payment could, for an investor, be severe.
Potential changes to the property’s loan and the investor’s portfolio include the removal of the home loan and the replacement of it with a higher interest loan, an arrears management fee of $55 per month, a dishonour fee and enforcement costs should legal fees and court documents be required.
Some loans could also find themselves facing a default, according to Mr Cabral. If this is the case, the bank could send a notice requiring the investor to pay the balance immediately or lose the property.
“It’s a very difficult situation to get out of,” he said. “A default could be stuck with you for seven years, stopping you from attaining other loans.
“Each lender has an internal credit rating for themself as a customer. But it’s not something that’s managed by a third party, so it’s an internal score using their own systems and metrics.”
Of those surveyed, 50 per cent of those who admitted skipping a mortgage repayment spent the cash on ‘latest gadgets for their homes’, while 40.4 per cent used the cash for ‘a holiday’.