Are your debts making it hard to pay the mortgage?
By: Melanie Taylor
Being in debt is a difficult situation for anyone, but when it limits your ability to repay your mortgage – arguably your most important debt – it can become very worrying.
Thankfully, there are a few ways you may be able to improve your situation.
What to do if you can’t pay your mortgage
First and foremost, you should never ignore the problem. A mortgage is a secured debt, and as such, you could ultimately lose your home if you fail to keep up on payments.
Contact your lender
In the first instance, you should always contact your mortgage lender to explain your situation. In most cases, your lender will want to help you – they may agree to a short payment holiday, or a temporary reduction in your payments, in order to allow you to focus on your debts and get your finances back on track.
However, you should only consider this as a short term solution. In general, your secured debts should be your first priority. If your unsecured debt problems cannot be solved during a short repayment holiday, then you may benefit more from a more specific debt solution.
Also be aware that your interest will continue to build up during a repayment holiday, so you could end up paying more overall.
Get free, independent debt advice
If you cannot come to a satisfactory agreement with your lender, then it’s a good idea to speak to a debt adviser to discuss your other options. There aren’t any debt solutions that will help directly with your mortgage payments, but if you have unsecured debts that are making it difficult to pay your mortgage, the right debt solution (such as a debt consolidation loan or debt management plan) might make it easier for you to meet your mortgage payments.
Consider a remortgage
If you’re in the position to do so, a then a remortgage could significantly reduce your monthly outgoings. With interest rates currently very low, many people are switching from fixed-rate deals to cheaper variable-rate or tracker mortgage deals. A fall of just a small percentage can save you hundreds or even thousands of pounds every year, depending on the size of your mortgage.
Take the following example of a £120,000 repayment mortgage being paid back over 25 years:
• At an interest rate of 5.5%, your monthly payments would be £736.90 • At an interest rate of 3%, your monthly payments would fall to £569.05 – a saving of £169.85 every month, or £2014.20 per year.
Consider that some of the savings you would make could also go towards repaying your debts, and the benefits are clear.
You may also want to consider temporarily switching to an interest-only mortgage. This can significantly reduce the amount you pay each month, but be aware that you will still have to repay the capital (the amount you borrowed) at a later date, and since this will continue to accrue interest, you will pay more towards your mortgage in the long run.
If you are in mortgage arrears, perhaps due to debt problems - Think Money may be able to help.
Article Source: http://www.ArticleBiz.com
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