Struggling to pay mortgage?

In both the US and UK, There has been an increase in the number of homeowners struggling to pay their mortgages. This is due to several factors.

• Rising interest rates. Interest rates in the US have increased from the below 3% in 2001 to 4.75% at the moment
• Increased cost of bad Credit Mortgages. Well publicized problems in the subprime mortgage industry has meant the general risk and therefore cost of subprime mortgage has risen. The increased risk of subprime lending has made it more expensive for mortgage lenders to bundle the debt and sell it onwards.
• End of Introductory Offers. At the height of the mortgage lending bubble, homeowners were often sold inappropriate mortgages. These mortgage deals offered a low introductory rate, but, after the first two years the interest rate reverted to a much higher rate. In the UK, many are also coming to the end of fixed rate deals
• Fall in House Prices. Many subprime mortgage products were sold on the basis of a continued rise in house prices. As US house prices are now falling, it is difficult for people to remortgage, they are locked in with mortgages upto 110% of the net value.

How to Cope when Struggling with Mortgage Payments.

These are all possible solutions to dealing with mortgage problems. Some are more desirable than others. Generally you should try the ones at the top before the ones lower down.

1. Remortgage.

Is it possible to switch to a better deal with a lower interest payment, possibly choosing one which offers a lower rate for the first year. Check first with your existing mortgage dealer, then get quotes from a variety of providers. This is the easiest way to reduce your monthly payments. You will need to check your details for when you are no longer tied to exit fees. - Remortgage Advice

2. Reduce Other Spending.

If you are struggling to pay your mortgage you need to look carefully at all the other expenditure. If you just switch mortgage products it may only provide a temporary break, without dealing with the fundamental issue of spending greater than income.

3. Increase Income.

Try to take an innovative look at how you might increase income. This may include taking in a lodger, selling on ebay, looking for a second income on the internet - start blogging about your debt.

4. Consider Moving to a different area.

This could save a few thousand pounds on your mortgages, but, for many people it is undesirable because of the cost and inconvenience of moving. Nevertheless it remains a possible solution for those desparate to reduce their mortgage size.

5. Interest Only Mortgage.

This is a good way to reduce the monthly repayments. It means you no longer make payments to reduce the capital debt that you owe. It means you are responsible for finding an alternative way of paying of the mortgage loan. If an interest only mortgage is used for a short time like 1 or 2 years. It can reduce your payments during a period of financial difficulty. You can then later go back to paying the capital repayments as well. - Interest only Mortgages

6. Increase mortgage term

Another option for reducing mortgage payments is to increase mortgage term. It will cost more in the long term, but, does increase short term affordability. see: Why I increased my mortgage term

7. Speak to Bank.

If you have difficulty meeting a mortgage payment, it is always preferable to let your mortgage provider know beforehand. This will help minimise any adverse credit rating in the future. Remember that unauthorised missed payments will negatively effect your credit ratings and make future remortgages more expensive.