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Are you struggling with mortgage repayments?

It’s fair to say that we have all been struggling with the financial uncertainty surrounding Coronavirus over the last year. Some have not been able to work. Income has been reduced. Living costs have increased and monthly finances have gone array.

Whatever the reason for you struggling to keep on top of your mortgage payments, you may have started to build up a debt… and you won’t be alone.

You may have missed one or more monthly payments or paid less each month than agreed, but whatever the reason, it is always best to get in contact with your mortgage broker or loan provider as early as possible.

If you know there’s going to be shortfall in your finances for a period of time, your lender may just be able to help – a ‘payment deferral’ would allow you to pause your mortgage payments for three months.

Our advice? Find out what you owe in total – your debt is only likely to increase if you don’t and we are all aware when it comes to mortgage repayments, you could end up being taken to Court and your home being repossessed.

But there are options out there, so don’t give up and hope the problem goes away. It won’t.

Instead, take the time to carefully consider what you could do to get back on top of the debt – draw up a budget to show your monthly income and outgoings, look at ways to cut costs and come up with some ideas of how you may be able to repay what you owe.

Once you've worked out a way of dealing with your debt, you will need to come to an agreement with your mortgage lender.

If you don't have any options for paying off your debt or can't reach an agreement with your mortgage lender, you should get help from an experienced debt adviser straight away.

Further advice on how to repay your mortgage debt follows…

Making extra mortgage payments

If you’ve got some money to spare each month, you may be able to pay back what you owe by making extra payments on top of your usual monthly mortgage payments.

To work out if you've got extra money to spare and how much, you will need to work out how much money you’ve got coming into your household each month and how much you need to pay out on bills and other expenses. This is called working out a budget.

When you've worked out your household budget, including any extra income you can earn, you'll be able to see how much money you have left over to pay off your mortgage debt. You will need to write to your lender and explain what you’re proposing to do.

Looking at your budget

If you've fallen behind with your mortgage payments, you will need to take a good look at your household budget. This will tell you if you've got any money left over which you can use to pay off your debt.

You will need to make a list of all the money you’ve got coming in and all the money going out of your household. This should include any other debts you owe. Make sure that the amounts you put down are realistic.

Think seriously about whether it's possible to increase the money you've got coming in or make cutbacks on your spending.

For example, you may be able to:

There are lots of different ways to boost your income and spend less on your outgoings.

An experienced debt adviser can help you work out how much money you’ve got to pay off a mortgage debt and any other debts you owe. They can also advise you about ways of increasing your income and spending less money.

Struggling with mortgage payments

Adding what you owe to your Capital

You might be able to clear your mortgage payments debt by adding the money you owe to your capital (the amount you borrowed) and paying it back over the remaining period of the mortgage. This is known as capitalising the arrears. You could also ask to extend the term of the mortgage in order to keep your monthly payments down, although you will end up paying a much larger amount in total.

Giving up your endowment policy

If you have an endowment mortgage, you could think about giving up your endowment policy or selling it off to an investor. This will provide you with a lump sum of money which you can use to help pay off the debt. However, you should think very carefully before doing this. You will need to find another way to pay off your mortgage loan and you will also need to find alternative life insurance cover. You will also need to find out whether there would be any penalties or other costs involved in bringing your endowment policy to an end.

Get independent advice first. You will need to write to your lender and explain how you're proposing to clear your debt.

Borrowing money

You could see if it’s possible to take out a loan, or borrow money from someone you know, to help you pay off the mortgage debt. Don’t borrow money from someone you know unless you know them well and can trust them. Be careful not to borrow from loan sharks.

You will need to write to your lender and explain how you're proposing to clear your debt.

If you take out a loan, check whether you can afford the repayments by working out your budget. It may also be a good idea to get advice from an expert debt adviser first.

Personal pensions for those over 55

You could take some of your pension money to help deal with your mortgage debt if you’re over 55 and have a defined contribution pension. ‘Defined contribution pensions’ are pension pots that are built up over time through regular payments.

You should consider the following before taking out some or all of your money:

You should speak to a financial adviser before taking money out of your pension pot to pay off mortgage debt.

Mortgage Payment Protection Insurance

If you’ve lost your job or had a temporary loss of income, check whether you have mortgage payment protection insurance (MPPI). You may have taken a policy out at the same time as you got your mortgage or afterwards. The MPPI policy may cover your mortgage payments if you can't work because of unemployment or sickness.

There are lots of circumstances in which, even if you have a payment protection policy, it won't pay out. You will need to check the terms and conditions of your policy carefully to see if you are covered. You may need to get advice about this.

You might also like to read our blog: What is Equity Release?

Source: Citizens Advice Bureau

A credit file is the fairest way of assessing the level of risk that customers represent when applying for mortgages and insurance. It will indicate their reliability when it comes to paying bills and using financial products and is one of the best indicators available.

Along with mortgage lenders, even insurers are now starting to give better rates to customers who have a good credit rating.

Read on for five easy ways to boost your credit score –

  1. Make sure you appear on the voters roll – it is now compulsory to not register to vote and carries a large fine.
  2. Know your credit every time you apply, and importantly space out your applications.
  3. Play your cards right by not holding too many. Cancel any cards that you no longer use.
  4. Build up your reputation. Make sure that you have a history of managing credit responsibly by staying within overdraft limits and making certain you never miss a payment on your credit cards, loans and utility bills.
  5. Stick to a fixed telephone line. When you apply for any credit, make sure you use your landline number as a contact because where credit applications are concerned this gives a sense of stability and reliability to the lender.

And a final piece of advice – Avoiding credit altogether will not give you a positive credit rating, however, don’t try to remedy this by applying for lots of different products at once. If you would like to find out more information regarding your credit score or learn more about our products and services, please contact our Top House team today.

Mortgage lenders must make sure you take out a mortgage that you can afford. Find out what they are likely to check along with the information you will have to provide. If you are applying for a new mortgage to buy a home, increasing your current mortgage or remortgaging, your lender must check that you can afford your repayments now and in the future. To do this they will need information about your income and outgoings.

PROVING YOUR INCOME

You will need to provide evidence of your income to show how much you can afford to borrow. If you are employed this might mean showing your payslips. If you are self-employed or a contractor you might have to show your tax returns, accounts, business plan or projected earnings. If the income you will use to cover your mortgage payments comes from more than one job, you will usually need to show evidence for each job. For other types of income like shares, bonuses or a pension you may have to provide documents proving how much you receive.

You will have to let your lender know if you expect your income to go down or your outgoings to go up. The evidence you will need for each type of income will vary between lenders. What ever they need from you, they must be sure that your income will cover your mortgage as well as you regular basic spending and other commitments.

CONFIRMING YOUR SPENDING

Your adviser or lender will also need to know what you need to spend to keep up a basic standard of living. They can then work out how much of your income you can afford to spend on your mortgage. They will look at your spending in three categories.

ESSENTIAL EXPENSES

This is what you regularly spend on the things that you cannot do without, such as: Food, household cleaning and laundry, gas, electricity and other heating costs, water bills, telephone, essential travel, council tax, buildings insurance, ground rent and service charges (for leasehold properties).

BASIC QUALITY OF LIVING COSTS

This is what you need to spend on occasional essentials, with some allowance for leisure costs including: clothes, household goods (furniture and appliances) and repair, personal goods such as toiletries, basic leisure costs, including non-essential transport, Tv license and childcare.

REPAYMENTS AND OTHER COMMITMENTS

This covers other payments you know you will have to make including debts you are paying off such as credit card bills, loans or hire purchase payments. The exact details you will be asked for will vary between lenders but you should expect to discuss regular spending in all of these areas.

INTEREST ONLY MORTGAGES

If you want to apply for an interest only mortgage then the lender will also ask you to explain and show proof of your plan for repaying the full loan when the interest only period ends. The lender will check that your plan is still in place at least once during the interest only period.

CHECKING FUTURE AFFORDABILITY

Your mortgage lender will look at how interest rates are predicted to change over a minimum of the next five years, to see how they might affect your mortgage payments. If your payments are likely to go up they will check that you could still afford them if your outgoings and income stayed the same. It is possible that rates could go up by more than predicted. If this happens then your payments could be higher than predicted too.

PAYING YOUR MORTGAGE AFTER YOU RETIRE

If your mortgage is due to last until after you retire then your lender will check that you can afford your payments with the income you expect to have during retirement. The information they need will depend on the lender and the length of time it is taken out before you look to retire.

CHANGING AN EXISTING MORTGAGE

If you already have a mortgage and want to remortgage, a lender may be able to arrange this without doing all of the affordability checks. The lender will still have to do the checks if you are: increasing the amount that you are borrowing and/or making a change that might affect what you can afford (for example extending a mortgage into your retirement, or removing someone from a mortgage contract). For further information about mortgages, please contact the Top House team.

You may like to read: 10 Questions to ask your estate agenthttps://www.tophousemortgages.uk/10-questions-to-ask-your-estate-agent/

Martin Lewis has a guide to Boost your Mortgage Chances you may like to read.

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Top House Mortgage Solutions Ltd
Head Office: Victoria House Lowside, Outwell, Wisbech, Cambridgeshire, PE14 8RE
Company No 06584434
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