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Increasing numbers of people are struggling with their mortgage repayments - with severe consequences. If you fall behind on your mortgage payments, you need to take action straight away. In some cases, the problem can be solved if you act quickly. Don't wait until the debt becomes unmanageable. Many lenders charge penalty fees if you miss payments. The sooner you deal with the situation the more options you have, and the less chance that you will lose your home.
If you think you're at risk of repossession, don't ignore the situation - there is action you can take:
Taking your First Steps:
Seek advice and help as soon as possible. Don't be tempted to think all your problems will go away if you don't dwell on them.
Talk to Your Lender about Your Situation - be honest and ask them what they can offer to help you through this difficult financial patch. Don't ignore their letters - your bank will be more receptive if you contact them swiftly rather than leaving it until they threaten to repossess your home.
Most lenders will expect you to come up with your own plans for paying off your mortgage, rather than making suggestions as to what you should do. You need to show that you will be able to pay of any arrears you have and keep up with future payments until your mortgage is completely paid off. If you haven't worked out your options yet, it's still important to speak to your lender as soon as possible, to let them know that you are taking action to put things right.
You can either write to your lender or make an appointment to discuss your situation in person. You will need to:
- Produce a detailed statement of your income, spending and debts
- Explain any plans you have to increase your income or reduce your spending
- Explain what changes you would like to make to the mortgage and how the new arrangements will affect the future payments
Your lender will consider your proposal and decide whether to accept it. You may have to negotiate further.
Negotiating with your lender can be complicated; especially if you are not sure what options are available. There are a lot of options for lenders but they can sometimes be reluctant to use them. You may want to get independent advice before you decide what to do. A specialist adviser can help you to look at all the options and put together a realistic and affordable proposal.
Contact Debt Plan Direct for immediate assistance we will help you set up a budget you can afford and enable you to prioritise your debt payments. A good rule of thumb is that your mortgage payments are top priority.
Reducing Your Mortgage Payments - Although you will eventually have to pay back the whole of your mortgage, there are several ways that it might be possible to change it to make your monthly payments more affordable, including:
- Taking a 'payment holiday'
- Switching to a different mortgage
- Adding your arrears to your mortgage
- Extending the number of years on your mortgage
- Reducing or stopping your capital repayments temporarily
The best solution usually depends on the type of mortgage you have and your age and personal circumstances, including how much you owe, how much you can afford to pay each month and how many years are left on your mortgage
See if You Can Take a Mortgage Holiday - Certain deals allow you to take a break from your repayment schedule - which might be enough to get you through a tricky patch and back on a secure financial footing.
Shop around - If your mortgage is coming to the end of its fixed-rate period, try to calculate how much your monthly repayments will increase by - then start looking at other deals in the market.
Work Out Your Options
The best way for you to sort out your payment problem will depend on your individual circumstances. If you want to stay in your home, you will need to find a way of stopping your arrears from rising while keeping up with your future payments. You also need to pay off any arrears that have built up so far. To do this, you need to consider:
- Cutting back on non-essential spending
- Increasing your income (through wages, benefits or renting out a room)
- Reducing your mortgage and/or insurance costs
If none of these options are possible, or you want to leave, you may decide to sell your home voluntarily and move somewhere more affordable. You may also be tempted to give your keys to your mortgage lender, but this will probably increase your debts.
Be Cautious
If you have lots of other debts as well as your mortgage, you may be tempted to take on a larger mortgage with another lender. This may enable you to pay off clear your debts, but it can also be risky. Even if the interest rate is lower, it may be difficult to afford. You may also have to pay arrangement fees.
Steer clear of "mortgage rescue" companies - These predatory firms promise to solve your debt problems by buying your home quickly with minimal fuss. They often pay as little as two-thirds of a property's true value. And sometimes - despite the promise that people will be able to live in their homes indefinitely - many homeowners find themselves signed up to unprotected, short-term tenancies that leave them in danger of being turfed-out on the streets
If you unable to maintain the minimum payment on your mortgage or secured loan, then you are in serious danger of losing your property. If you want to continue living in your home you should get further advice from a Debt Plan Direct adviser.
