The price of homes in New South Wales has eased slightly but it is still a very healthy market and people who have deferred their mortgage payments because of work interruptions caused by the coronavirus lockdown would be very wise to take stock of their options.
Most relief has been granted on a six month basis, and that period is scheduled to end later this month. Already, the banks are urging customers to start repaying their loans and many have already responded. The banks are being realistic. and even a part payment of the agreed monthly term is usually acceptable because the deficit will eventually be added to the length of the loan.
The worst possible scenario will come when the recovery gains pace but still leaves a substantial job deficit. There are predictions of a vast pool of the unemployed that may take several years to deplete, and obviously the situation of those with a home mortgage will become untenable. It is important that action be taken by the mortgage holder and not left until it becomes an action by the bank.
There is a very good chance that there will be many people unable to resume their mortgage payments because they are unemployed and it is inevitable that this will bring a glut of foreclosures. The price of homes is heavily influenced by the balance between supply and demand and that is a situation that forces prices downward. Buyers flee the market in the expectation that the asking price will descend even lower.
Usually, it is the banks that are very unhelpful when this sort of situation occurs. Their prime concern is to recover the money outstanding in the unpaid loan, or to limit the loss if that can not be gained in the selling price. The mortgage holder's equity usually disappears in that situation.
The banks are in the money business and have little experience in handling real estate. Homes gained by way of foreclosure are usually dumped back on the market with the garden untended and the lawns uncut. A foreclosed home has a certain " look " that excites buyers to drive a hard, price bargain.
The greatest danger comers to mortgage holders who are now middle aged and have been paying off a home for some years. They have considerable equity in the home they live in, but poor prospects of a job during this recovery. They might be wise to put the home on the market and regain that equity while market conditions remain suitable.
Unfortunately, many people in that position struggle on with a mounting debt until a foreclosure is inevitable. They are hoping for a miracle, but unfortunately these economic downturns are cyclical and run a predetermined course.
The wise would take a practical appraisal of their financial position, and act accordingly. It is the clever people who think - and then act on it !
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