What Causes Mortgage Arrears?

The first thing to note is that Home Owners suffering from Mortgage Arrears largely find themselves in this situation for the first time having never been delinquent on loan repayments in the past. It is usually an unexpected and therefore unplanned life event that initially triggers falling behind with mortgage repayments. This could be an event such as one partner in a couple losing a job, a partner or child falling ill, a death in the family or a separation/divorce. All these events are traumatic enough to cope with in their own right and are compounded by the financial pressures to make ends meet.

If we were to look even closer at an event such as one partner falling ill, we would also see secondary and other impacts. Impacts such as the partner who is well having to reduce hours at work to look after the ill partner. This could reduce a families income to 1/4 of the pre illness income. If the family's debts were indicative of the average two income family, for example, a home loan, 2 or 3 credit cards and two car loans; it would be a very short time before this family was in serious financial difficulty.

Once in Arrears on your Mortgage and other debts, it can take substantial effort to get back on track. In the example above with Home Loan repayments of say $1400 pcm (per calendar month), two car loans of $400 pcm each and three credit cards of $600 pcm repayments; they would fall behind by $2800 pcm! In just two months this family would be more than $5000 behind in repayments and the ongoing maintainance of the continuing debt.

This is an everyday situation with Home Owners today with one of the options to help rectify the situation being a Debt Consolidation Mortgage Loan, or a Bad Credit Mortgage Loan to pay out the Mortgage Arrears and other Loan Arrears.

For further information: See FAQ
What is a Home Loan Arrears?

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