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Home rescue: help with mortgage arrears

If you’ve missed payments or the bank has started writing to you, the worst thing to do is wait. There are more options early than late.

By Yatin Kainth, Financial Adviser FSP1007497. Last reviewed

Home rescue and mortgage arrears help in NZ

Short answer

If you’re in mortgage arrears in NZ, contact your bank and ask about hardship relief, which by law it must consider. Options include a payment holiday, interest-only for a period, extending the term or adding arrears to the loan. If the bank won’t help, a non-bank lender may refinance you out of arrears, buying time to sell on your terms rather than through a mortgagee sale.

How urgent is your situation?

Have you missed one or more mortgage payments?
Has your bank sent a formal demand or a Property Law Act notice?
Do you have other debts in arrears, such as IRD, credit cards or car finance?
Has your income dropped, but you expect it to recover?
Do you have at least 30% equity in the home?

Answer all five questions for next steps. Nothing is saved.

Your options, from first to last

  1. Hardship application to your bank. Under the CCCFA you can ask for a change to your loan because of unforeseen hardship such as illness, job loss or separation. The bank must respond.
  2. Restructure: interest-only for a few months, a longer term, or capitalising the arrears.
  3. Refinance to another lender. Specialist lenders can clear arrears and other debts in one loan, usually at a higher rate for a short period.
  4. Planned sale. Selling yourself almost always gets a better price than a mortgagee sale.
  5. Free help: MoneyTalks (0800 345 123) and local budgeting services can negotiate with creditors on your behalf.

What is a mortgagee sale?

If arrears aren’t sorted, the bank can serve a notice under the Property Law Act 2007 and, after the notice period, sell the home to recover the debt. You’re still liable for any shortfall plus the bank’s costs. A mortgagee sale is the last step, and there’s usually time to act before it if you move quickly.

Talk it through

I’m Yatin Kainth, a Financial Adviser at Mortgage Sense in Hobsonville, Auckland (FSP1007497), comparing 30+ lenders. Advice is provided under the Mortgage Managers licence (North West Group Holdings Ltd, FSP682791). This page is general information, not personalised advice. See the Disclosure Statement.

Book a free chat or call 022 064 7770.

Common questions

What should I do if I can’t pay my mortgage?

Contact your bank before you miss a payment if you can, and ask for a hardship application. Then get independent help from a budgeting service or an adviser.

Can I refinance if I’m behind on my mortgage?

Sometimes, with a specialist lender, if you have enough equity and a realistic plan. Expect a higher rate for a period.

How long before a bank can sell my house in NZ?

After default the bank must serve a Property Law Act notice, which usually gives at least 20 working days to fix the default before it can sell.

Does mortgage hardship affect my credit score?

Missed payments are recorded. An agreed hardship arrangement is usually better for your record than ongoing arrears.

Sources

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