More than 800,000 Australian mortgagors have arranged payment deferrals with their lenders since March according to figures from the Australian Banking Association.

Now that these repayment holidays – and Government stimulus payments – are being wound back, some households may face a mortgage crisis if their income levels have not rebounded.

A leading debt management expert has provided her own tactics and ‘insider secrets’ to help stressed mortgagors negotiate with their lender to reduce their repayments or get out of their mortgage with as little a fallout as possible.

Dominique Grubisa is CEO and founder of DG Institute – a leading debt and wealth management advisory and education service, that has helped more than 12,000 Australians manage their debt, protect their assets and grow their wealth through property and business.

“The lengthy process of a property repossession to recoup the funds – which, most of the time is for a lesser amount – is the last step a lender will want to take,” Ms Grubisa explains.

“Many will want to cut a deal with the borrower – such as reworking the terms of the loan, temporarily reducing the interest rate or repayments or, as a last resort, allow the borrower to sell the property for them.

“The key is to have an open line of communication with the lender, show you are willing to work with them, and know your rights. They won’t foreclose on a mortgagor as long as they are trying to work through the situation with them.”

Here are her seven tips if you’re repayment holiday has ended and you are still struggling to make payments.

Propose a temporary repayment plan. A repayment plan will allow you to make smaller, regular payments until your temporary hardship period eases. The catch is that, once you return to normal repayments, your lender will want to negotiate higher repayments to cover the period where you paid less. The key is to go to your lender with a realistic repayment plan that you know you can stick to. For instance, if your household is on a single salary temporarily, demonstrate to your lender that once you find work, two salaries will be able to fix up all arrears within a short time.

Request a mortgage modification. If your income is reduced for an indefinite period, you could negotiate modifications to your loan with your lender. You could either extend the term of the loan to reduce the size of each repayment or switch to an interest-only loan. A little-known secret is that occasionally banks are also known to temporarily reduce mortgage interest rates – particularly if the only other option is foreclosure.

Seek forbearance. This is applicable for mortgagors who cannot make loan repayments in the short term but are expecting a lump sum payment that will cover repayments in arrears. Forbearance is where the lender agrees to forego loan repayments for a while and will accept the lump sum down the track. It could be money coming from an insurance claim, redundancy package, or sale from another property.

Ask for a short sale. This prevents the bank from repossessing a property. This is where the lender allows you to put the property on the market yourself, then present all purchase offers to them. They choose the offer that they will accept as the final settlement of your outstanding debt. The negotiation process for a short sale is very delicate and nuanced but remember there are some powerful consumer protection laws on your side.

Co-operate with repossession. Having a lender repossess your property is always a last resort for them and should be a last resort for you. A lender would like to avoid going to court and get orders for repossession of your home and a judgement against you for the value of your loan. As a borrower, you will also want to avoid incurring all of their legal costs. Rather than wait for court orders, you could proactively approach your lender and request that you be involved with the sale. Your assistance with the sale will go on record and is likely to soften the blow to your credit rating.

Buy your property after repossession. If your circumstances change when the dust settles after repossession, you may be able to repurchase the property from your lender at the auction or after the sale. While these cases are complex, nothing is impossible.

Seek hardship relief. Lenders are obliged by law and their own Codes of Practice to help you in times of difficulty if you have reasonable cause to request financial hardship. Keep in mind, most lenders also have hardship officers who can review your situation and determine what assistance they can offer you.

Have you taken a mortgage holiday during the pandemic? Are you worried about your ability to repay your debt when the holiday ends?