What is a Loan Default?

When someone defaults on their home loan it means that they have not made their payments on time. Generally, banks will send a letter to the customer if a payment is late and they will usually charge a late fee or penalty. If a customer continues to miss making their payments for a period of generally three to six months the bank may default them and this means that the bank will put a black mark against the customer’s credit file.

 

If the situation does not improve, the bank may turn to the Mortgage Insurer to make good on the loan. If the Mortgage Insurer pays out the mortgage to the bank, they will come to a payment arrangement with the customer. In many cases this will mean that the customer will have to sell their home to clear the outstanding loan.

 

If you have questions or you need help with your financial situation, please call us on 07 3264 7100 for a confidential chat about your home loan anytime.

 

Written by Tracie Palmer for the Cornerstone Group 15 September 2022

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