What Is Mortgagee In Possession

Buying a house after applying for a mortgage is a step every Australian takes. However, if you start hearing “Mortgagee in Possession” from your real estate agents, it means you’re about to lose your house. Just know this only happens if you stop paying the mortgage. It’s simply a legal term in real estate terminology to justify that your house is no longer your property.Fortunately, a mortgagee in possession is a last resort. There are options to help you get back on track with your mortgage before reaching such a stage of default. Defaulting means that you stop paying your loan completely. So, understand what is a “mortgagee in possession” and how to avoid finding yourself in that situation!

Understand about “mortgagee in possession,” including how that works in a circumstance involving effects on owners. In addition, you’ll find out what lenders do before repossession and after repossession, along with some tips on avoiding such a situation!

First, see what these real estate terms mean: 

Thus, the mortgagee in possession is at work when a lender, or the Mortgagee, takes possession of a property. It occurs when a borrower fails to pay up their mortgage. To fail to pay up simply means that the mortgagor stops paying off the mortgage completely.

This might seem rare but it happens to most of us. Serving mortgage payments can become challenging and these are the common cases:

• Losing A Job: If your main source of mortgage payments is your job and you lose it. It may result in defaulting mortgage payments.
• Variable interest rates: Most of the home loans in Australia are variable in terms of interest. So, if you manage payments according to the low interest rate at the start and the bank increases the interest rate, it can become difficult to pay the monthly mortgage. 
• Too Much Debt: While the debt might not be directly tied to other mortgages, if the borrower has other debt besides this mortgage it can sometimes become too complicated to manage them all along with the mortgage. 
• Health Cost or Disability: Sudden medical expenses, such as for a long-term disability, can make it even more challenging to keep up with the mortgage payments.
• Death of a family member: When the person who had to pay the mortgage dies and their income was required for the payment, it can lead to a default on the mortgage.

Missing mortgages doesn’t mean mortgagees in possession will get to work. The mortgagees must follow specific steps before and after taking possession of the property. Here’s a before and after guide on the role of the mortgagee in possession:

Steps Before Repossession

Lenders do not have the right to just “own” your home or property due to a few missed mortgage payments. They give you time to act by completing the following steps:

Steps After Repossession

Here’s what typically happens after the Mortgagees “own” the repossessed property or home. Once the lender takes back the property, their agent steps in to manage it. Their job is to: 

Steps After Repossession

Here’s what typically happens after the Mortgagees “own” the repossessed property or home. Once the lender takes back the property, their agent steps in to manage it. Their job is to: 

• Take control of the property. This includes making sure the property is secure and ready for sale.
• Sell the property. The property may be sold through an auction or privately on the real estate market.
• Provide the net proceeds to the lender. The money from the sale is then used to cover:
  • The remaining loan balance.
  • Costs for any repairs or maintenance needed to sell the property.
  • Legal fees related to the default.

Yes, you prevent the mortgagee from taking your home. If you can’t pay the mortgage, the first step is to contact your lender. Don’t wait until you default on your payment, settle the matter before the date set on the mortgage agreement. Let your lender know about your financial situation as soon as possible.

If they know beforehand, they can help you out! Usually. You can use their hardship programs to pause or reduce payments for a few months. Some lenders might be willing to change your loan terms or interest rate. This can make your payments more manageable, either temporarily or long-term.