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Property as Security Interest in Australian Home BuyingIf you already are familiar with some of the general principles and procedures of borrowing money to purchase a home or other property here in Australia, you know that the home or property itself is the lender’s major source of security. While the buyer’s name will be the only one recorded on the official title to the property, other legal documents will award the lender a security interest in the property. Foreclosures are not yet a major problem in Australia, but if you follow international news at all, you know they are at crisis levels in the United States and elsewhere. If a borrower fails to make repayment on the mortgage loan, the lender can foreclose on the property; which simply means they exercise their security interest in the property and take it back. Contrary to the opinion of some, lenders do not like to do this, as it can be difficult and costly for them to turn around and sell a foreclosed property to recoup the amount loaned. In many cases, they would prefer to work out an arrangement that will allow them to keep receiving some form of payment and keep the borrower in the home. If you are having trouble meeting your monthly mortgage obligations, it is imperative you consult with your lending institution as soon as possible. In today’s troubled economic times, consumers are not the only ones finding themselves in financial trouble. Banks are finding themselves unable to meet their financial obligations as well and in places like the United States, bank failures are at record levels. Although that is not the case in Australia, banks here do fail from time to time. So what happens to the security interest they have in properties on which they hold mortgages? In almost all cases, the assets of the lender are taken over by another financial institution and they assume the security interests of all the mortgages of the failed bank. To the borrower, nothing changes except the name that appears on their mortgage statements. In extremely rare cases the purchasing institution will simply write off the existing mortgages of the failed institution as bad debts. In essence, borrowers in this instance get their homes for free! |
