For most people, monthly rent or mortgage payments are the primary expense both in terms of the amount of money and its importance. But what happens if you find yourself struggling financially and unable to make your mortgage repayments?
While you may be tempted to panic, worry, feel ashamed or simply want to bury your head in the sand, the good news is that there are steps you can take to avoid repossession and get back on track. Let’s take a look at the process and what your first steps should be.
Contact your lender
This can feel like a very difficult thing to do, but rest assured that your lender would much rather you got in touch with them as soon as you felt like you might be going to miss a mortgage payment than wait until you had spiralled into debt. Most lenders will want to help if they can, as it makes much more business sense for them to have a customer who is at least staying in touch and doing their best to arrange a payment plan.
Don’t panic and assume that missing one payment means you’re already on the path to repossession. Most mortgage lenders in the UK are signed up to the government’s mortgage charter, which lays out all the help that lenders should offer in the first instance to help you get back on track. It also means they have agreed not to start any repossession proceedings until at least three months of payments have been missed, and they won’t force anyone to leave their home within the first year of missing a payment, other than in very specific circumstances.
Consider your long-term options
If you’re struggling because your home simply isn’t affordable long term – it’s too big for you perhaps, or your job or family situation has changed since you bought it – then you might need to think carefully about how sustainable your situation is and whether you need to take significant action now before things get out of control.
One simple way to stop a repossession could be to sell up and downsize, reducing your mortgage payments long-term and potentially freeing up some capital too, depending on the value of your home and how much equity you have. If you have time on your side then you can do this on the open market, but if you would rather have a quick sale at a guaranteed price then you could think about selling to a cash house buyer.
Look at short-term finances too
Assess all of your regular income and outgoings and look at where you have the opportunity to either generate some extra cash or cut costs. Most of us spend more than we realise and there is usually the potential to save money on those smaller items of expenditure that add up, like coffees and lunches out, and to find better deals on utilities, insurance, phone contracts and subscriptions.
Keeping a spending diary where you account for every penny can make you more of a conscious spender and help you spot areas for savings.
Don’t panic if you find yourself struggling – get in touch with your lender, be honest and make a plan that works for you.
