Don't let your mortgage drag you down
12/03/2008
With repossessions and household debt both on the rise, it’s clear that an increasing number of people are finding it hard to make ends meet. But if you are struggling to pay your mortgage and are worried about losing your home, don’t panic – there are plenty of ways you can ease the pressure without handing back your keys.
It’s good to talk
Your first port of call should always be your mortgage lender. You may be able to switch to a different mortgage plan or even take a holiday from your repayments. If talking to them doesn’t help, you could try another lender – but bear in mind that by remortgaging you may have to pay penalties and fees to end your existing agreement.
Ask the experts
Try contacting a consumer organisation for free advice, such as Citizens Advice – find your nearest office in the phone book or at www.citizensadvice.org.uk– or the Consumer Credit Counselling Service (CCCS) at www.cccs.co.uk.
Tighten your belt
Set yourself a budget. Begin by listing all your current outgoings – including utility bills, council tax, insurance and food – and see where you can cut down your spending. LowerMyBills.co.uk will show how much you could save by switching essential outgoings, such as motor insurance and gas and electricity, to different suppliers. To see how much you can save click here.
The FSA, the UK’s financial watchdog, has online budget and mortgage calculators – go to www.moneymadeclear.fsa.gov.uk. The Council of Mortgage Lenders, at www.cml.org.uk, also offers a mortgage calculator so you can see the impact of any changes to your mortgage or level of payments.
Don’t stop paying
Even if you can’t manage your full repayments, you should pay as much as you can. This shows your lender that you are making an effort and may increase your chances of negotiating an affordable deal.
Explore all avenues…
Check what help you’re entitled to – you may have mortgage protection insurance or be able to claim benefits.
…and possibilities
If you can get a good deal, you may find that taking out a new loan will help you to pay your debts. With LowerMyBills.co.uk, you can to find the best offers on loans, mortgages and credit cards. But be careful – you could be putting your home at even greater risk if the loan is secured against it.
Increase your income
If you have a spare room, you could take in a lodger – up to £4,250 a year is tax-free. If you have a garage or parking space, that could also generate extra cash. Other options include taking a second job or looking for a better-paid job.
Check your credit report
This is the personal history of the credit you have taken out, from your mortgage to catalogue accounts. It will give you a snapshot of how much you owe and how well you are coping. Lenders look at your credit report when they decide whether to make you an offer and what terms to set, so it’s crucial that it’s up to date and accurately reflects your position. A repossession will stay on your credit report for six years – the same length of time as an Individual Voluntary Arrangement or bankruptcy – and could make it difficult for you to get credit in future or result in you paying higher interest.
You can see your Experian credit report as often as you like with a free, 30-day trial of CreditExpert, the online credit monitoring and identity fraud protection service.
Keep hold of the keys
If you’re desperate, it’s far better to sell your home yourself – at least you’ll still have somewhere to live while you market it. If you give the keys back to your lender, you will be responsible for the mortgage until the house is sold and you could have to pay any shortfall if it sells for less than the value of the mortgage.
Beware of easy opt-outs
Don’t be tempted by specialist companies offering to buy your home very quickly, usually within weeks, and rent it back to you. These schemes are not regulated by the FSA, so you are not protected if anything goes wrong. You will normally get less than the market value for your property and could also be evicted if you fall behind with your rent.
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