If you are struggling to pay your mortgage then you need to take action now. Whatever you do, don't bury your head in the sand as this will just make matters worse.
For those worrying about their mortgage payments here's some advice on how to deal with the problem.
Talk to your lender before you fall into arrears
Many people will fall into arrears with their mortgage without informing their lender that they are struggling to afford their payments. Lenders are more accommodating with borrowers who talk to them about their financial situation before going into arrears. Often people feel embarrassed, anxious or overwhelmed at the thought of talking to a stranger about their finances, but staff employed by lenders are trained in dealing with this type of problem and are usually sympathetic.
Find out all your options
When talking to your lender find out about all the options available. Here are some possible solutions to managing your monthly mortgage payment:
- Switch your mortgage to interest only - if you are currently paying the capital and interest on your mortgage balance then switching to interest only payments will reduce your monthly payment.
- Extend the mortgage term - adding years to your mortgage may not be ideal but doing so will reduce your monthly payment and you can review the years when your financial situation improves and you can afford more.
- Change the payment date - if your financial situation require a short-term solution it is often easiest to contact your lender so you can agree to make your mortgage payment on a different date; you'll avoid a missed payment record on your credit score if you pre-arrange this.
- Arrange a short payment holiday - payment holidays can be agreed with your lender where payments that you miss are accrued and spread over a period of time to allow you the space to adjust for a financial interruption.
However, you need to be aware that any change to your mortgage terms will mean that the loan will take longer to pay off and, therefore, cost you more in the long term.
Know your rights
All lenders will have a code of conduct that they must adhere to in all arrears cases. Ask for a copy of this code of conduct at the outset of your discussions with the lender so you are clear on your rights.
Take advice
There are several charities that offer free debt advice, to find out more read my article - Where to get free debt advice. Taking advantage of these services at an early stage can provide you with invaluable advice and help you resolve issues more quickly and easily. You could avoid falling into a situation where court action is taken by your lender by following the guidance of a debt specialist.
Look at your overall finances
Just dealing with your mortgage in isolation may mean that you are overlooking opportunities to address other financial commitments that could help you to meet your mortgage payments. Take the time to look at all aspects of your income and outgoings and see if you can make some savings that can go towards paying your mortgage. Be tough but realistic with yourself and cut down on every expenditure possible because at times like this keeping a roof over your head is your main priority. You can find a host of budgeting tools in our article, "The best budgeting apps in the UK: How to budget without trying".
Only agree to a repayment plan you can keep
Your lender will want you to agree on a plan to pay off your arrears over time. Make sure you agree to a payment plan that you are confident you can keep up with. The worst thing you can do is to agree to an overgenerous plan now only to fall behind again in a few months because you cannot afford to pay it. Being honest with your lender will help them to present options that are more likely to lead to help you reach an agreement that is suitable for both parties.
Consider downsizing
If you are struggling to get your mortgage payments on track then maybe you need to consider downsizing. There are, however, some drawbacks to this course of action - if you are already in arrears then you may have a problem getting a new mortgage and there are some large costs involved with moving house, which need to be fully considered. However, improving the loan to value could help you to access better interest rates. Speak to a mortgage broker to discuss your options so that you have all of the facts before deciding that it is time to sell your home. If you don't have a mortgage broker then you can get an independent mortgage review through Vouchedfor*.
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