Back to home
Things have not been easy for several years with Brexit, Covid-19 and now the soaring cost of living. All of these circumstances have caused many people considerable financial hardship and this in turn means that people are finding it hard to juggle their monthly expenditure. What should you do, then, if they are struggling to pay your mortgage?
Talk to your mortgage lander
The first thing to do, as soon as you think you might struggle to pay your mortgage is contact your lender and talk to them. Lenders do understand that difficulties can occur and will always try to work with you to manage the situation. Some lenders will have specific hotlines so it is worth checking on your mortgage lender’s website to find the best department to contact.
When contacting your lender make sure you have your account details ready, but it will also be a really good idea to have a budget to hand as your lender will ask you questions around your income and monthly expenditure. Your lender will then work through your budget with you, look for areas where you could cut back and also try to work out what you can afford to pay. Some lenders will grant you a mortgage holiday, i.e. no payments for a short period or they might agree to reduce your monthly payments for a short period to help you out. Typically, these agreements would last 2-3 months, but depending on your circumstances your lender might agree to extend this. Remember that the full amount is still due and any kind of break in payments are likely to cause your repayments will go up slightly once you start paying again.
Other options that you could explore with your mortgage lender are:
- Moving to an interest only mortgage and only pay the interest on the loan. This might incur fees for the mortgage move, especially if you are in a fixed term mortgage deal. Also remember that you will not be paying off any of the loan itself so the amount you actually owe will not go down.
- Extend the term of your mortgage. This means paying the same amount back but over a longer period which will reduce your monthly payments. The thing to remember here is that you will ultimately pay back much more interest over the loan period if you extend it.
It is important to understand that, should you take a mortgage payment holiday or agree reduced payments, your credit score could be adversely affected making it harder to borrow money in the future. Despite this, you should not ignore the situation as ignoring it might lead to your lender looking to re-possess your home. Don’t be too alarmed here, though, as a re-possession is always the absolute last resort.
Help is at hand
If you are struggling with your finances, talking to your lender is key, they will do all they can to assist you and they will have a few options available to help to relieve the pressure on you. This might affect your credit score, but there are ways you can improve your score moving forwards so this should not be an obstacle to working with your lender. The most important thing is to come to an agreement which allows you to keep on top of your finances and keep your home.
