Cases in which mortgage repayment becomes difficult due to reduced income or unexpected increases in expenses are not uncommon. If delinquency is left unaddressed, the property may ultimately go to auction and you could lose your home. Here, we explain the process after delinquency and the practical options available.
What happens if you fall behind on your mortgage?
- Notice of demand is sent：It arrives within 3 months of delinquency. It requests repayment
- Loss of the benefit of time：If delinquency exceeds 3 months, you may be asked to repay the full remaining loan balance at once
- Subrogation payment：The guarantee company repays on your behalf. Your record is added to the credit blacklist
- Auction proceedings begin：The court conducts an on-site assessment, and the information is published online
- Bidding and eviction：Ownership transfers to the successful bidder. Forced execution is also possible
What are the four ways to avoid auction?
1. Leaseback
This is a service that lets you sell your home, convert it into cash, and continue living there as a tenant. One advantage is that you no longer have to pay fixed asset tax, but monthly rent will apply.
2. Review of repayment terms
If you consult your bank or financial institution early, they may agree to a temporary reduction in your repayment amount or an extension of the repayment period.
3. Loan refinancing
Refinancing a high-interest loan into a lower-interest one can reduce your monthly burden. It is particularly effective when the remaining repayment period is 10 years or more and the outstanding balance exceeds 10 million yen.
4. Voluntary sale
This is a method of selling the property before auction at a price close to market value with the financial institution's approval. Because it can sell for more than at auction, part of the proceeds may be used for moving costs or living expenses.
Frequently Asked Questions (FAQ)
Q. After how many months of missed mortgage payments does auction begin?
In general, auction procedures begin after about 6 months to 1 year of delinquency. However, the response may vary depending on the financial institution.
Q. What are the disadvantages of a voluntary sale?
Being placed on the credit blacklist cannot be avoided. In addition, if the sale price is lower than the outstanding loan balance, you will still need to repay the remaining debt.
Q. What should you do first if repayment starts to feel difficult?
Please contact your lending financial institution immediately. The earlier you seek advice, the more options you are likely to have and the greater the chance of avoiding auction.
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