What causes mortgage in arrears?

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An image representing wondering about causes of mortgage in arrearsMany causes contribute to a home loan arrears; as can be read in the Reserve Bank of Australia (RBA) report. As such, an arrears problem is most likely a result of reduced income. However, there is always a further underlying cause of not making regular repayments. Although some reasons are not immediately able to be seen.

Consequently, common reasons for mortgage arrears leading to eviction are:

Debt Related Issues

  1. Firstly, a change in the debt level, such as getting a car loan.

Income Related Issues

  1. Secondly, reduced income, such as having a baby and taking maternity leave. Hence, there is an upset to financial stability.
  2. Thirdly, income issues related to reduced economic conditions and an increase in the unemployment rate. Consequently, we see this with the Coronavirus outbreak.
  3. Also, the end of an employment contract can mean income stops.

Environmental or Economic Issues

  1. Thirdly, a decreased housing market and real estate values. As such, the mortgage arrears could relate to an economic downturn resulting in no equity and inability to consolidate debt.
  2. Moreover, divorce and family break up can cause a significant impact on financial stability.

Health Issues

  1. Finally, mental health, gambling and substance abuse issues that reduce the capacity to maintain mortgage payments.
  2. Then, medical reasons such as cancer, death of a family member, sickness of a child or income earner. Also, a partners health issue could result in one income loss. Whereas a child’s health issues can result in the loss of both incomes.

The Complexity of Mortgage in Arrears Issues

Quite often, the problems that have caused arrears are complex. For instance:

  • Initially, starting with gambling and the associated debt issues.
  • However, the debt issues, caused by gambling then result in divorce.
  • Finally, divorce and other problems cause mortgage payments to fall behind.

There is a range of refinancing and hardship solutions available to assist. Importantly, if you are behind on your home loan payments, you should seek financial counselling advice. Otherwise, employ the services of a specialist mortgage broker to assist in refinancing your mortgage in arrears.