What Happens to My Home When a Bank or Home Loan Provider Goes Broke?
Like all of us, banks and other home loan providers are not safe from the possibility of going broke, especially with the way the COVID-19 pandemic has impacted the Australian economy. If your bank or home loan provider goes broke, what happens to your home? Are you at risk of losing it?
How Your Home Loan Provider Going Broke Impacts Your Home
Luckily, you will not lose your home if your home loan provider goes broke. What will most likely happen is that your mortgage will be sold to another lender. This lender will probably keep your current mortgage terms, including the amount of your loan the length of the term. However, your new lender may change your interest rates to reflect how they set their rates. You will not be forced to pay your loan in full before the end of the term. However, if you are in default, you may be forced to pay your debt in full immediately because your loan is not protected.
How Do Banks Go Broke?
It is highly unlikely that your bank or home loan provider will go broke because the Australian government would step in to prevent a mass financial crisis. The two biggest reasons a bank or home loan provider would go broke are if a majority of their customers default on their loans and if a financial crisis triggers Australians to withdraw most of their money from banks. Banks make their money off of the interest charged on loan products. With people being unable to pay off their loans, the banks will have to start selling their loan portfolios to competitors to make up the loss.
The experts at Mortgage House can answer any question you may have about the lending process, including what happens if your current loan provider goes broke.