Are you worried about getting behind on your mortgage payments? Is the thought of your house being repossessed scaring you? Don’t bury your head in the sand! Read on to find out how you can work with your lender to get back on track financially in case you are suffering or can foresee mortgage arrears.  

Doing nothing at all will only put you at a risk of losing the roof over your head.

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   Talk to your Lenders before Missing a Payment

   

In case you are worried that you might start to struggle meeting your mortgage repayments. It is best to contact your lender as soon as possible. Even if you think that you might scrape by the end of the month, if you are worried about the future, just pick up the phone and dial.  

According to Money Expert, this will stand in your favor with your lender. It will will allow you to work with them early on to avoid getting yourself into serious arrears. The council of Mortgage Lender states that ‘your lender will be more sympathetic with you, and will provide as much assistance as possible.’ 

2. You Don’t have to Make a Full Payment; Pay Whatever You Can

You should pay as much money as you can afford to your mortgage lender. Even if it’s not the full payment. This is because it shows the lender that you’re committed to paying the mortgage. Plus you’re trying everything possible to deal with your financial problems. When you suddenly stop paying your mortgage, it rings a bell to the lender. As such you will be less likely to get back on track compared to a person who maintained their monthly payment, albeit reduced.  

3. Take Advantage of the Flexible Mortgages

If you have an offset deal or a flexible mortgage, you might be able to take a payment holiday or underpay for a few months. This could prove to be a lifetime. Especially if you have been going through a tough financial patch.  

Flexible mortgages allow you to do this. But you need to have already overpaid the mortgage to a minimum of the same amount. Each lender usually has their own terms and conditions regarding the issue, so check the small print for details.  

4. Is it Possible to Pay Interest Only?

If you currently have your mortgage on interest and capital basis, but you can’t afford to pay your monthly mortgage commitment, you can ask your lender if you can pay the interest on your mortgage for a given period.  

In most cases, the lender are quite stringent about interest-only borrowing for the full term. Although they could be willing to take it up as a temporary measure to help their clients through a financial blip. So, if your lender agrees to allow you to pay the interest on your mortgage for 6 months. This could significantly lower your payments for the said period. Although your overall mortgage term will be increased accordingly. However, it will mean not having to sell your home quickly. 

5. Know All of your Options

If you’re worried about meeting your monthly mortgage payments, you should know that there are many different repayment plans that your lender can agree to. The right option for you will depend on a number of factors, including your current financial situation. However, it’s worth asking if the following options are available to you: 

• Lowering the monthly payments and lengthening the term of the loan, like from 20 years to 30 years.
• Accepting lower payments for a short amount of time until you sort out your financial hurdle and resume paying the full payments, and repay the built-up arrears
• Capitalizing the arrears. This involves adding the arrears charges that you accrue to the outstanding mortgage amount instead of making an immediate payment. This gives you some breathing space. Although adding up the charges to the total loan means you will have to pay interest on them.
• Changing how you make the payments, such as the date you make them.

6. Knowledge is Power

All lenders are governed under certain rules and regulations in regards to the borrowers and arrears. They also have policies in place to make sure there’s fair treatment for each borrower. The lenders also make their rules and procedures very clear to you, and should provide you with all the details on the kind of treatment you can expect. Ensure that you ask for this from the start, so that you will be fully aware of not only your rights, but also your responsibilities.  

7. Have a Second Look at your Wider Finances

In case you’re struggling with your mortgage repayments, taking a thorough look at your finances can be an invaluable step. Although setting up a budget sounds quite obvious, not all families do this, considering that it can save you hundreds of dollars every month.  

Budgeting will also show your lender that you’re taking serious steps towards sorting out your financial mess. What if there isn’t enough money left after you’ve budgeted? Well, besides speaking to your lender about it, you need to seek independent debt advice.  

8. Taking Independent Advice

If the financial problems you’re facing are more serious than missed mortgage repayments, it’s always a good idea to get independent financial advice from a professional organization rather than your mortgage lender. Some financial problems can affect a range of other areas, and you might find yourself missing other important payments like utility bills, etc.  

Since the current economic climate is leaving many households financially vulnerable on multiple area, lenders are learning to show patience with people who face a sudden change in their circumstances. As such, those who find themselves with serious debt problems should inform their lender immediately, and seek impartial advice from charities such as the CCCS (Consumer Credit Counselling Service). 

9. Choose a Plan You Can Comfortably Stick To

Be honest when speaking with your lender at the outset. Never commit to a plan that you are not sure you can meet at all times, since the lender would actually prefer that you renegotiate for smaller monthly repayments, instead of have you run into further arrears and other problems down the line.  

10. Consider Downsizing

If you think meeting your current monthly mortgage repayments is now a serious concern that is not likely to change in the near future, consider selling the house. If you have equity in the home, and it’s at a desirable location and in pristine condition, you can sell it and pay up your mortgage as well as other arrears charges.  

There are many borrowers in arrears who manage to work with their respective lenders to get back on track financially. However, many still don’t, considering that the more serious the arrears become, the harder it becomes to pull yourself back on track. Sometimes, the difficult decision of selling up can be the smart one.