More and more people are struggling to meet mortgage repayments. But even if you find yourself struggling with arrears, you can protect yourself and your family from becoming homeless. Here are some ideas to keep you in your home.
Speak to your mortgage company
This should always be the first step that you take, as your mortgage company will prefer to come to some arrangement with you if possible. It is not in their best interest to make families homeless, especially when you have shown them that you wish to address the situation as soon as possible. Never hide your head in the sand if you are experiencing difficulties. Whilst you may not be able to see a way out of the current situation, your mortgage company will be far more experienced in dealing with such situations.
Extend your mortgage term
Although in the long run you will end up paying more interest if you extend your mortgage term, you could find that your repayments drop to a more affordable level in the short term. Having lower monthly repayments can be all it takes to keep a family housed. Any arrears can be taken into account and either incorporated into the total amount payable, known as capitalizing the arrears, or may be paid in installments.
Rent out your property
If you are in a large home that is more than ample for your needs, you could consider renting out your own home and renting a smaller, cheaper property to live in. Sometimes, the rent can be enough to cover the existing mortgage as well as providing a little on top, which can be used for general property maintenance or as additional income. You cannot, however, do this without permission from your mortgage company, as there are usually terms in your original mortgage agreement that would prevent this. If you have permission, you could use a site such as My Online Estate Agent in order to search for properties more suited to your family’s size.
Change your mortgage type
If you are struggling in the short term and you still have a good few years left on your repayment mortgage, you could consider switching to an interest only mortgage. This is not a long-term solution, as the mortgage will need to be cleared at some point, but it can be a means of circumventing the problem in the shorter term. Interest only mortgages require a smaller monthly payment than repayment mortgages, which can be enough to provide a little ‘wiggle room’ in the household budget.
Check your entitlement to benefits
There are a number of benefits available to people on low incomes that can give your finances the boost that they need. It is a little known fact that millions of pounds of benefits go unclaimed every year by those who are legally entitled to the help. If you are on a low income, contact your local benefits office or citizens’ advice bureau and ask about any benefits that you might be entitled to.
Don’t hand the keys back
Many people hand their keys back to the mortgage provider in a state of exasperation, but you should never do this. The chances are that you will get a better price for your house whilst still living there than your mortgage provider will be able to raise by selling an unoccupied house. Furthermore, your name will appear on the mortgage repossessions register, which will then make it more difficult for you should you ever wish to get a mortgage in the future.
Go to court
Many people think that once the situation has reached court, it is a lost cause. However, you still have the chance to stop proceedings if you can demonstrate to the court that you are willing to clear your arrears and maintain your payments. The courts are happy to look at reasonable offers, so even if you haven’t managed to clear all the arrears, they will accept such an offer as your goodwill. If they wish to do so, they can then order your mortgage company to continue to accept the reduced payment until either the arrears are cleared or your circumstances have changed.
Sell your home
As a last resort, you may be able to sell your home and find another place to live. Selling your home yourself through a reputable company can maximize your profit and enable you to completely clear your debt. A good online company will also leave you with a smaller bill to pay, as they charge a one-off fee rather than asking for a percentage of the selling price. They can do this due to smaller overheads.
Donna Baxter is a retired estate agent who now writes for a selection of property blogs and websites. Her contributions include those on My Online Estate Agent.