Many of our incomes have been affected by the unrelenting nature of the pandemic. As a result, for some, paying our bills and mortgages has become tougher. For others, it’s become totally unmanageable. Labour has warned of a wave of post-pandemic repossessions and it’s all too clear that the government need to up their game when it comes to providing support for struggling homeowners (and renters, too!).
Thankfully, if you’re worried about repossession, the Financial Conduct Authority has banned property repossessions until the New Year. That said, being at risk of having your home repossessed is a serious dilemma for any property owner, yet it is an increasingly common scenario and one which needs to be understood even if you’re currently on firm financial footing. If you can’t pay your current mortgage, or are at risk of having your home repossessed, then read on; here are 5 tips for dealing with mortgage arrears.
KEEP UP WITH YOUR MORTGAGE OBLIGATIONS
It might seem obvious, but the main reason that your home may be at risk of being repossessed is if you fail to fulfil your side of the bargain with your mortgage provider. A single missed payment will not usually result in you being turfed out, but it will impact your credit score and if this trend continues then you will find yourself in dire straits.
A mortgage involves taking on a huge amount of debt, and changes elsewhere are usually necessary to pay it off and still live responsibly and sustainably. To get the tight grip of your finances required for a healthy relationship with your mortgage, it should be your first step to carefully construct a monthly budget and do a regular audit of your finances. This starts with a calculation of your incomings and outgoings and then looking for areas where you can cut out any non-essential expenses. Experts recommend that in a healthy budget, your mortgage should account for 28% of your gross income (the money you earn), with 35% an absolute maximum before things get difficult to handle.
If you’re struggling to pay your mortgage because of the pandemic, the guys at Money Saving Expert have pulled together a comprehensive guide on Coronavirus Finance & Bills Help; do check it out.
TALK TO YOUR LENDER
Honesty – or a level of it, at least – is often the best policy where your finances are concerned. Thankfully most lenders will be able to make allowances for missed payments and work with you to get through whatever financial problems you are facing in a particular period of time. You may also be eligible for a mortgage payment holiday, depending on your circumstances.
Mortgage lenders recently announced they would be offering a coronavirus-related mortgage repayment holiday for a further few months and would give tailored support to people who didn’t qualify for one. According to some lenders, switching their mortgage to an interest-only option could be a prudent move and dramatically reduce monthly costs.
However, if you are applying for a mortgage repayment holiday unrelated to the pandemic, there are different rules that apply. The best thing you can do is talk to your lender to understand the impact and financial ramifications of any mortgage repayment holiday before you make a decision.
CONSIDER SELLING YOUR HOME
Selling your home because you are behind on your mortgage represents a last straw decision, but sometimes it amounts to the smartest one. If it looks like you will soon be unable to afford your mortgage payments, and you want to avoid having your home repossessed, it might be advisable to sell it so that you can pay off what you owe to the lender.
There are lots of ways to quickly sell your London property in such circumstances and once you have done so, you will then have the option to opt for rented accommodation instead, until such a time as you can get back on your feet. Be aware that many mortgage providers will have penalties for early repayment of your loan, which may kick in if you decide to sell. Also, be aware that any previously missed payments will still be owed. Selling up doesn’t mean a totally clean break.
GET ADVICE AND LEGAL REPRESENTATION
If you’re worried about home repossession, constantly scrolling through Google, looking for titbits of advice and reading horror stories of worst case scenarios isn’t going to help.
Instead, seek official, professional advice at the earliest possible opportunity. The housing and homelessness charity Shelter, the National Debtline and StepChange Debt Charity all provide free guidance if you’re worried about your home being repossessed and can’t meet mortgage payments.
If you are already facing a repossession claim from your lender, you will need to make sure that you have adequate legal representation. An expert in this field will be able to advise you as to whether you qualify for any special support in these circumstances, or perhaps even exemption from the clauses of your original mortgage.
This is also a good idea because your legal representative will be able to help negotiate a deal with lenders and oversee other aspects of the process which could be both challenging and incredibly stressful for you to tackle on your own.
No one knows what the future holds, even more so in the current unprecedented climate. As such, it is a good idea to get insurance to cover the costs of your mortgage and ultimately prevent the spectre of repossession looming large when disaster strikes.
Critical illness cover, for example, will make sure that if you or a loved one are unable to work because of a serious health condition, your mortgage will not be an untenable burden.
Once again, it is always best to consult an expert to get the best deal for you and to overcome whatever issues you face as a homeowner.
THE BOTTOM LINE
Though falling into mortgage arrears and being threatened with the prospect of home repossession can feel pretty scary, there are things you can do to alleviate the situation. Keep a cool head, be open about your finances, and seek professional help, and you’ll see this thing through in one piece.