Debt is often considered a ‘double-edged sword’ in real estate. Borrowing money from the bank allows you to acquire properties that you would not be able to buy in cash, but it also comes with the responsibility of making your mortgage payments each month.
With prices where they are in Macau, most transactions are made with a mortgage. Interest rates have been low for years and most people don’t have trouble making their payments.. but what if you do?
The number of payments you can miss before the bank forecloses on your property depends on a number of factors. The first factor is the portfolio position of the bank you borrowed from. If they are holding a pool of low-risk loans, they might be more lenient, while if their loans are higher-risk in nature they might be quicker to file foreclosure proceedings.
Other considerations might be the general economic climate, your personal credit history and the condition and demand for the property in question.
So, what can you do if you are faced with foreclosure? The last thing you want to do is try to sweep it under the rug and avoid communication with the bank. Under general circumstances, the bank does not want to go through a drawn-out and potentially complicated foreclosure process.
If you reach out to the bank and discuss your situation with the relevant manager, it might be possible to come up with an alternative payment structure that works for both parties.
If you are personally occupying the property, another option might be to move out to a much cheaper property and rent out the current property, using the rent to help make your payments.
The last option of course is to sell the property altogether. To achieve a speedy transaction, you will likely need to discount the price of the property. Even so, it can certainly be the preferred alternative to getting foreclosed on your property and you could still make a profit depending on how much your property has appreciated over the years.
It is of course better to avoid committing to a mortgage you can’t handle in the first place. The best way to do this is by making sure that if you rent out your property, the rental income would be enough to cover the mortgage payments and any associated management expenses.