The rise in number of mortgage defaults is caused by many factors. In the US, and to a lesser extent in the UK, increasing numbers of homeowners are struggling to meet their mortgage payments and are facing the possibility of their home being repossessed. If this is the case and you are Struggling to Pay your mortgage, these are some actions, which can potentially save your home being repossessed.
This is perhaps the easiest and most effective method. If you happen to be on your bank’s existing standard rate, the chances are you will be able to find a much better deal. Those who are looking to remortgage, can usually take advantage of a mortgage rate 1-2% below the standard variable rate. This can equate upto £100 a month for homeowners on a standard size mortgage. Whether you are struggling or not, it is always worth trying to remortgage.
2. Extend Mortgage Term
If your monthly mortgage payments are getting on top of you, consider extending your mortgage term. By doing this you will see your monthly payments fall. The downside is that you will end up paying more in the long term. However, if it means you are able to continue meeting the minimum mortgage payments, it is worth doing.
3. Interest Only Mortgage.
This will also reduce your monthly mortgage payments, often quite substantially. By only paying interest on your mortgage, you reduce the amount you have to pay. However, again the disadvantage is that, in the long term, you will need to find an alternative investment plan to pay off your mortgage capital. Might be good in the short term.
4. Save Money Elsewhere.
If you are struggling to pay your mortgage, don’t bury your head in the sand hoping it will go away. Instead, take a calm and reflective view of your financial situation. Look very closely at other areas of expenditure you might be able to reduce. For example:
- do you need cable TV?
- Can you switch electricity / gas / telephone providers.
- See: painful but effective ways to reduce debt.
5. Take in a lodger
Taking in a lodger is not as bad as some people fear. If you have a spare room, the extra income could be upto 50% of your mortgage payment. True, there is some inconvenience, but it is a small price to pay for the extra income. If you are uncertain about taking in an extra lodger, remember, you are able to choose who lives with you. Make sure you meet them before they enter. If a spare room is not immediately available; be creative, see whether there is another room you could cheaply convert.
6. Payment Holidays.
If you are in difficulty it is best to ring your mortgage company and explain the situation before you go into areas. They may be able to make some temporary allowances. However, this does not tackle the fundamental problem.
7. Move – Downsize
This option is probably the most drastic and only to be undertaken when the others have failed. If you are able to sell your house, you can temporarily rent somewhere cheaper or buy a cheaper house in a different location. The money saved can be used to pay off your mortgage. This option is not easy, due to the costs involved in moving, but it might be worth doing in the long term.