What Happens if You Stop Paying Your Home Loan Monthly Instalment?

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Are you struggling to pay your home loan monthly installment? Life won’t always be smooth sailing. When you are going through a rough patch, the same house that you bought so happily just a few years ago can weigh you down like a thousand-tonne boulder. So what happens if you stop paying your monthly installment for your home loan? What are the options available to you?

 

First, let’s take a look at the bad news. Brace yourself, they are not pleasant.

 

  • You will lose your home: The lender (bank) will send you notice to pay. If you repeatedly ignore their notice, they will exercise their right to foreclose your home. In simpler words, you will lose your home.

 

  • It affects your credit rating: The fact that you defaulted on your loan appears on your credit history, which can have very serious consequences. You may not be able to find employment as some employers are very strict about not hiring people who are neck-deep in debt. People who have a list of defaulted loans are assumed to be reckless, irresponsible and untrustworthy.

 

  • The lender may seize money from your account: If you have an account with the lending bank and have some balance in the account, the lender may seize the money as repayment of the loan. Having your money seized like that can be a humiliating experience. If that was the only money you have left, then you may suffer severe financial hardship.

 

  • You may be sued by the lender: If the lender (bank) has reasons to believe that you have sufficient money but are hiding it from them, they may initiate legal proceedings to make you cough up the money. Being sued by the bank is never nice. Besides costing you money you can’t afford, it may tarnish your reputation for life.

 

  • You may be denied loans in the future: Once you are known as a loan defaulter (you can’t hide it because it will be in your credit report), you may not be able to get a loan in the future.

 

Now let’s take a look at how you can mitigate the damages.

 

  • Refinance your home loan: Refinancing a home loan means to trade your existing loan with a new loan. The lender (it may be the same or a different lender) pays off your existing loan. Your new loan has a lower interest rate and a lower monthly payment so that it will be easier for you pay. If you are going to take this option, then make sure to compare mortgage loan rates in Singapore before signing up for any home loan refinance package.

 

  • Extend the tenure: In some cases, the lender may allow you to extend your loan tenure further from the maximum 35 years. You may have to have additional borrower or guarantor. Extending the loan tenure means you will be paying more, but your monthly payment will be lower.

 

  • Rent your home: Generate money to repay the loan by renting it out to tenants. A lot of homeowners do this. There are certain laws you are required to abide by when renting your home, so make sure to talk to a property agent first.

 

  • Negotiate with the lender: Sometimes, you may be able to lower the interest rate or defer the payment by negotiating with the lender. But do not do it yourself. Get a debt counsellor to negotiate on your behalf.

 

  • Sell your house: If nothing works, then it may be better to sell the house. With the money left after repaying your debt (if there is any), you can buy a smaller house.

 

Being unable to pay your monthly installments has its consequences, but it is not the end of the world. You can mitigate your situation by being strong and doing the right things.

 

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DMS