Struggling with mortgage repayments?
Brian McCarthy, independent mortgage and protection consultant at ESPC Mortgages, has advice if you are are having difficulties with repayments.
Since the introduction of the Mortgage Market Review (MMR) in 2014, lenders have a responsibility to ensure that mortgage repayments are affordable based on the circumstances of the client. This involves reviewing things like income, financial commitments and child care costs. They also look ahead to try and ensure mortgage repayments will still be affordable in the event of rate increases in the future, by applying a stress test to current affordability calculations. A mortgage is basically a loan secured on a property and if mortgage repayments fail to be met, the property may be at risk of being repossessed to clear arrears. However, this would be a very last resort and all parties, including the lender, would be keen to avoid this.
Unforeseen events can impact on the ability to maintain mortgage payments
Some of these may include:
- The death of a partner and subsequent permanent loss of one income
- Redundancy for either partner leading to a temporary reduction in household income
- Serious illness or accident resulting in one partner losing their income
- Maternity leave resulting in a reduction in income
- Marriage breakdown/divorce where one partner has moved out, causing problems with continuing mortgage payments until the property is sold
- Coming to the end of a low fixed rate product and suddenly being faced with a substantial increase in mortgage costs due to current standard mortgage rates.
What you can do
If you do find yourself in one of these positions, you should consider your finances and your budget. If you have credit card balances or personal loans, it is very important not to just cease payments and you should discuss with the providers how you may be able to restructure the debt. Using savings or obtaining financial help from a family member may be one option which would allow you to reduce monthly outgoings. Buildings insurance is a condition of all mortgage products and must remain in place, but you may be able to shop around and obtain a lower cost product. Mortgage and income protection cover may also be in place and you should discuss with your lender how this can be maintained.
The most important thing to remember is to advise your lender immediately if your circumstances change so that you can review your options. Missing mortgage payments will have an impact on your credit history and make it very difficult to obtain credit elsewhere. Lenders are often more sympathetic than they used to be if clients go to them in advance to talk through changes in circumstances, and will want to work together to try and resolve the problem. This may include extending the term of the mortgage to reduce the monthly payment, switching to a lower rate product or there may be a payment holiday option with your mortgage to allow you to suspend payments for a short period and catch up later.
As Independent Mortgage Brokers, ESPC Mortgages can help with all aspects of understanding your budget, applying for a mortgage and dealing with the relevant insurance requirements. Pop in for a no obligation chat with the team at our Edinburgh Showroom or give them a call on 0131 620 8680.
The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain.