When PM Julia Gillard asked the audience in this week’s public forum how many could afford to pay their mortgage if they weren’t working, only a handful of the 200 strong crowd raised their hand….which based on experience, isn’t that surprising.

Because although purchasing a home and taking out a mortgage is often the single biggest financial outlay of a person’s life, not many people stop to consider how they would service a mortgage if they become sick or injured or out of a job.

So what exactly can you do if that were to happen to you?

Firstly, if you do find yourself in this position and anticipate having trouble making your mortgage payments, the single most important action you need to take is to get in touch with your lender immediately and explain your situation.

It may well be that you have to swallow your pride and admit you need help, but by sitting down with your lender and talking through ways in which you can manage your mortgage and stay in your home, it makes sense for both parties – particularly if there is a timeframe for recovery.

A few of the areas where many lenders can offer options for flexibility are:

ü      postponing payments

ü      reverting to paying interest only for the period

ü      refinancing the loan

Other more preventative options include investing in personal insurance products, such as income protection or total and permanent disability cover which can protect against such an event, especially if you fall into one of the following categories:

-          Families where one income earner is responsible for paying the mortgage;

-          Single people who have a mortgage;

-          Self-employed or contract workers who do not receive sick or injury pay; and,

-          Anyone without private health insurance.

Other alternatives that families and individuals can consider include reducing the size of your mortgage by downsizing or relocating to a more affordable area; encouraging another family member out to work, if it’s an option; or restructuring your finances to direct more towards your mortgage.

Above all, remember….by speaking to your lender and communicating a problem sooner rather than later they will be more fully informed to help you devise strategies for lessening the impact on yourself and your family – than if you sit there in dread, waiting for them to contact you.

Tags: Insurance, Lender, Mortgage

This entry was posted on Friday, August 13th, 2010 at 11:06 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.