4 ways to deal with house debt when you can't pay it off
Can't Make Mortgage Payments? Check out these 4 solutions to help keep your house.
Applying for a #houseloan is difficult enough, but #paying off your mortgage in full is even harder. Before you can pay off your mortgage, an emergency may arise and you may be unable to pay it off. If you encounter this situation, what can you do? Here are 4 solutions.
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Assessing your reserves
When you can't make your mortgage payments, the first thing you should do is assess your reserves. If you have money saved up for emergencies, this is the time to put your reserves to work.
A reserve is a crucial lump sum, whether you're applying for a house loan, a car loan, or investing in any other assets. A reserve fund of at least 6 times your monthly expenses is essential. This will ensure that you have enough money to meet your needs in an emergency, avoiding the impact of your daily life or the need to borrow more money and incur even more debt.
In addition to reviewing your savings, we recommend cutting back on unnecessary expenses. Take a look at your own and your family's expenses and identify areas where you can save and reduce them. You'll need to refrain from spending on things like shopping, coffee, and socializing, so that you have more money each month to pay your mortgage installments.
Increase your income
But if you've cut your expenses and still can't afford the mortgage, don't be discouraged. Find ways to increase your income. Find out what you're good at and what you're talented at. Turn those passions into a side hustle to add extra cash, such as selling things online, doing photography, or tutoring. These small incomes, combined, can add up to a substantial sum to help you pay off your mortgage.
Refinance your house.
Another option for those who can't afford the mortgage but have been paying for it for at least three years, is to refinance or transfer your house loan to another bank without penalty.
Refinancing typically offers a low-interest promotion from the new bank, or if you're still young, you can extend the repayment period, which can lower your monthly payments.
However, refinancing involves various costs that borrowers must prepare, such as mortgage registration fees, stamp duty, and appraisal fees for the collateral. It's important to compare the costs to determine whether the interest rate reduction is worth it.
Consult your bank.
However, if the financial problems you're facing are likely to persist for a long time, perhaps because you've been unemployed for a while, or your business income has dwindled, your savings are almost depleted, and you still want to keep your house, we recommend consulting your bank to see what solutions they can offer.
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Request for deferment of outstanding debt payments
In this case, the borrower may request to repay the outstanding debt for up to 36 consecutive months. This can be divided into three types:
- Requesting to divide the outstanding debt into equal installments, repaying continuously every month.
- Requesting to pay off the outstanding debt within the agreed-upon timeframe.
- Requesting to pay off the outstanding debt in a lump sum, divided into installments at the agreed-upon timeframe.
Requesting to extend the repayment period.
Borrowers who are younger may be able to request a longer repayment period, similar to a regular house loan, which can be extended for 30 years. The repayment period, when combined with the borrower's age, is greater than the agreed-upon timeframe. It must not exceed the bank's specified age limit, such as 60 years for permanent employees or 65 years for self-employed individuals. Extending the repayment period will also help reduce the monthly mortgage payment.
Requesting an additional loan to pay off outstanding interest.
In cases where the debtor is unable to pay all outstanding interest, the debtor can request an additional loan to pay off the outstanding interest and extend the loan term.
Requesting to pay only monthly interest.
Debtors may request to pay only monthly interest. This condition is usually only available to debtors with a good repayment history.
Requesting a lower payment than the normal installment amount.
This condition typically requires that the lower payment amount be at least 500 baht more than the monthly interest. The repayment period is up to two years and can only be requested once.
Requesting a special interest rate reduction.
This request is for a deferral in cases where the debtor's loan interest rate has been increased from the normal rate. The debtor can request an interest rate reduction on the payment date.
Requesting a temporary transfer of the house to a financial institution.
In cases where the debtor requests to temporarily transfer the house to a financial institution and repurchase it later. Financial institutions typically accept the transfer of collateral by deducting a maximum of 90% of the collateral value. Any excess debt must be paid by the borrower on the transfer date. The borrower will be charged a monthly rental fee of 0.4-0.6% of the collateral value.
Requesting a reduction in the monthly payment or extension of the mortgage payment period will require the borrower to accept that the interest on the mortgage will be higher and the loan will take longer to pay off. However, this solution allows you to comfortably pay your monthly mortgage within your means. In the future, when your income increases or a large sum of money comes in, you can use this to pay off or increase your mortgage payments, thereby eliminating debt and becoming free soon.
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Source: DD Property: bit.ly/44JFkAP
