When you initially signed your mortgage contract in Dubai, you have been advised by your banker to run the numbers and make sure you aren’t falling behind payments. But what if your circumstances have changed? No one had envisioned a force majeure situation as coronavirus pandemic. Most people don’t like to think about losing their jobs and reduced income risks.
Unfortunately, these days some people can find themselves suddenly struggling to make mortgage payments on schedule. If you are one of them, at such point, you need serious help and here is how to get it.
Contact your lender
It’s not just people who bought large homes who struggle to pay their mortgage month after month. Sometimes, even responsible borrowers face unforeseen circumstances. If this happens to you, it’s imperative that you reach out to your mortgage lender and explore your options for relief. That way, you might be able to avoid being late with your payments, or missing installments entirely. Both events will make a black mark on your credit record, and if you stop paying your mortgage altogether, you will risk losing your home to court auction.
What assistance might your mortgage lender have to offer? Depending on the circumstances at hand, the bank might agree to implement a mortgage installments holiday of three months while you work through the financial difficulties you are facing. Such relief option also applies to other types of debt, like personal or car loans.
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You may also be eligible for what’s known as a loan modification program. This will allow you to change the terms of your mortgage to reduce your monthly payments, thereby making them easier to keep up with. That lower monthly payment could be achieved by your lender simply agreeing to eliminate a portion of your outstanding home loan balance, or by granting you a lower interest rate on your mortgage. Or your lender might extend the term of your mortgage so that you’re stretching your outstanding balance out over a longer period of time, thereby lowering your monthly payments.
Why might a lender agree to any of these options? It’s simple: Your lender wants its loan repaid. It doesn’t want to deal with the hassle of lightly court procedures and auctions, so it can be worthwhile to reach out and see how flexible your lender is willing to be.
If you can’t make mortgage payments at all, try to sell
If you expect your financial problems to be long term, or you have already exercised the options with the lenders and they haven’t helped, then you may have no choice but to sell your home and unload that obligation.
Now, if your home is worth at least as much as your outstanding mortgage balance, this shouldn’t be a problem. But if you are behind on your mortgage and you owe more on your home than what you can sell it for, then you may have no choice but to pursue a quick sale. In times of economic crises, there is a handful of cash rich investors looking to snap assets below market price. Experienced real estate brokers usually have a list of such standby buyers. A quick sale will definitely be a financial loss for you, but the damage will be less substantial than that caused by Dubai courts auction, so it may be your best choice.
Another option you might consider is renting out your home until its market value comes back up to avoid a sale. Having that rental income could enable you to stay current on your mortgage while you wait things out.
Don’t fall behind
Falling behind on your mortgage payments can put you at risk of losing your home. Before you resign yourself to that fate, see whether your lender is willing to work with you, and look into refinancing. And if those options don’t help, aim to unload that property in the least financially damaging way possible. That way, you can work on rebuilding your savings and boosting your income so that you are able to buy another home with mortgage payments you can afford.
*Written by Gergana Mineva, Private Office Advisor at Engel & Volkers Dubai; To contact the author, please email here.