Owning your own home is a dream for many, but if life’s unexpected costs make your mortgage repayments hard to meet, paying for your house can quickly become a nightmare.
All it takes is a few missed payments for debt to creep up on you. But before you panic about heading towards repossession, sit down and review your options for getting back on track. Here are some helpful tips:
Talk to your lender
Right now your mortgage lender might feel like the enemy, but give them a chance to help. If you’re in arrears with your mortgage then you could meet with your lender about the options they have available to help you. Remember a mortgage is taken over a long period of time and lenders are used to customers facing lifestyle changes so have lots of experience of your type of situation. Here are some ideas of what they might be able to help with. They may suggest taking a mortgage payment holiday so that you can get some money together. Or they might be able to switch your mortgage repayments to interest only for a short time. This will lower your immediate payment amounts considerably. Another option is to extend your mortgage term, meaning you pay your mortgage back over a longer time and reduce those monthly payments. Or, ‘capitalise your debt’, which means adding the money you owe to the money you have borrowed.
Doing this means you clear your arrears debt immediately but you will have a larger mortgage to repay overall due to the higher balance and/or longer term.
It sounds obvious, yet there’s a reason you’re struggling with those repayments. What has changed in your lifestyle? Have you taken a pay cut or are you spending too much on luxuries? Time to get brutal with that spreadsheet. The Money Advice Service also has a Budget Planner tool on their website if you don’t have one already. List your incoming cash versus essential outgoings, then see how much is left and ditch luxuries for mortgage payments. If you’re still falling behind, perhaps you could think about renting out a spare room. Remember to check for early repayment charges on your mortgage though. A free debt counselling service like the Citizens Advice Bureau or National Debtline are good first stops for help with mortgage repayment queries, setting a budget and making sure you are claiming all the benefits you are entitled to.
SMI and Universal Credit
If you receive benefits such as Income Support or Jobseeker’s Allowance and can’t meet mortgage repayments, then you might qualify for Support for Mortgage Interest (SMI), which offers help towards interest payments on a mortgage up to £200,000. The scheme does not include capital payments. A further option to explore is Universal Credit, a benefit that can cover your mortgage interest repayments. However, if you already receive other benefits you may be exempt so investigate fully.
Check your Mortgage Insurance
Think back to when you took out your mortgage. Did you get mortgage payment protection insurance (MPPI) at the same time? If you did and you can’t work due to unemployment or illness, then you may be able to claim for cover of your mortgage payments. Be careful to check your insurance terms in fine detail. If you do qualify, this is a lifesaver.