With no end in sight to the cost of living crisis, you might find yourself unable to maintain the lifestyle you’re accustomed to, and in dire circumstances without other avenues of assistance or lifelines, you might even struggle to pay your monthly mortgage repayments.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
You might think that trying to correct the issue all on your own or suffering in silence is the only recourse you have, but that’s not true. Mortgage providers are more than aware about the current state of the economy and the effect on household budgets, and contrary to what many people may believe, working with your lender is the best chance you have.
What to do if you’re struggling to pay your mortgage
If you are struggling to meet your monthly repayment obligations or if you fear you might miss a payment, the first thing you should do is contact your lender. If you’re experiencing financial difficulties, they will work with you through a difficult time, but you will have more options if you get in touch with them before you miss a payment, so it’s important to reach out as soon as possible.
Many people fear that they will lose their home as a result of being unable to pay their mortgage, but the good news is that repossession is always a last resort. Your lender wants to keep receiving their money back and will only take the drastic step of eviction if there is no other option. There are in fact rules that state a lender must exhaust all other options and find a way to work with you before they resort to taking legal action.
Three main options
There are three main options to choose from if you’re struggling to pay your mortgage. Which one is right for you will, of course, depend on your individual circumstances.
Extending the length of your mortgage term
Extending the length of your mortgage term will lower your monthly payments, enabling you to keep more of your money to use for other essentials. With lower monthly payments, you’ll get more time to repay your mortgage, but it will increase the total amount of interest you will need to pay over the course of your loan. You should only pursue this option if there is no way to pay, and it’s important that you speak to your lender immediately so you can strike up a new deal.
Change to an interest-only mortgage
Another way to reduce your monthly payments is to switch to an interest only mortgage. It’s important to remember that while this type of mortgage will indeed lower your monthly payments, you will have to deal with the remaining sum when the terms of your loan are up. This means that you’ll need to have a plan in place for paying off the remaining balance and it will impact any future ability to refinance or sell your home in the future. There is also the possibility of interest rates changing or property values falling, which means you could end up owing more than what your home is worth. Again, an option to pursue when you’ve exhausted all others.
Request a payment holiday
If you need a few months of breathing room, you can speak to your lender about a payment holiday. A mortgage payment holiday typically lasts up to three months, so during that time you can try to get your finances back on track. Your lender can tell you if there are any fees you might need to be aware of, and don’t forget that taking a holiday will extend the term of your mortgage by however long your holiday is so you’ll end up paying more interest over the life of the loan. But if you find yourself really struggling to pay your mortgage, it might be worth exploring.
Get the help of a professional before it’s too late
Working with a professional adviser might help you avoid struggling to pay your mortgage if you act preemptively. Don’t ignore the problem in hopes that it will go away, seek out an expert that could prevent you from even reaching the point of struggling. To learn more about how we can help, contact Dental & Medical Financial Services today.