DAC LEGAL INSIGHT
Life is unpredictable.
A person who was comfortably servicing a home loan may suddenly lose employment, experience a decline in business income, suffer illness, or encounter other financial difficulties that make it impossible to continue paying the monthly mortgage instalments.
A question frequently asked is:
Can the borrower renegotiate the terms of the mortgage with the bank?
In many cases, yes.
A mortgage agreement is a legally binding contract, but that does not prevent the parties from varying its terms by mutual agreement. Banks generally recognise that it is often preferable to restructure a loan than to immediately institute foreclosure proceedings, particularly where the borrower has demonstrated good faith and has a realistic prospect of recovering financially.
Depending on the circumstances, a bank may be prepared to consider options such as:
- Extending the repayment period.
- Temporarily reducing monthly instalments.
- Granting a payment holiday for a limited period.
- Restructuring the outstanding debt.
- Capitalising arrears into the remaining loan balance.
However, borrowers should appreciate that these arrangements are not automatic. The bank is under no legal obligation to vary the original agreement unless it chooses to do so.
The most important advice is this:
Do not wait until legal proceedings have commenced before approaching your bank.
Many borrowers make the mistake of ignoring correspondence, missing instalments without explanation, or assuming that the situation will somehow resolve itself. Unfortunately, delay often reduces the available options.
Instead, borrowers should contact the bank at the earliest opportunity, explain the change in financial circumstances, provide supporting documentation where necessary, and propose a realistic repayment plan.
Banks are generally more willing to negotiate with borrowers who demonstrate honesty, transparency, and a genuine commitment to meeting their obligations.
Where negotiations fail, borrowers should seek legal advice immediately. An experienced legal practitioner can assess the mortgage agreement, engage with the lender on the borrower’s behalf, and ensure that any enforcement action is conducted strictly in accordance with the law.
Financial hardship does not remove contractual obligations, but neither does it necessarily mean that losing one’s home is inevitable. Early communication, sound legal advice, and constructive engagement can often lead to practical solutions that protect the interests of both borrower and lender.
The law encourages parties to honour their agreements—but it also recognises the value of good faith negotiations where circumstances have genuinely changed.
For legal advice on mortgages, debt restructuring, banking disputes, contract law, or property matters, contact Dzekedzeke and Company.
