I’m a mortgage expert – three things you must do now if you’re struggling to pay your home loan
HOMEOWNERS will be worried about affording repayments following interest rate hikes – here’s what to do if you’re struggling.
The Bank of England increased interest rates to 3% earlier this month – the biggest rise seen in 33 years.
Usually, banks hike mortgage rates when interest rates go up – which could add up to thousands of pounds to your bill.
Homeowners were given some light relief after the bank said interest rates would hit a maximum of 4.6% next year, instead of the 6% predicted.
This means lenders could reduce some rates, easing the squeeze for millions of homeowners.
But if you’re struggling to pay as a cost of living crisis cripples budgets, Coreco technical director Nick Morrey explains what you should do.
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Nick is one of the experts on The Sun’s Squeeze Team panel, here to help households through a crippling cost of living crisis.
If you’re worried about how to make ends meet, are struggling to pay off your debts or don’t know how best to manage your cash, get in touch by emailing Squeezeteam@thesun.co.uk.
Contact your lender
It’s best to contact your lender as soon as possible if you are struggling.
It’s best to do this before you know you won’t be able to meet your monthly repayments, and not after.
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That’s because going into mortgage arrears is very serious.
If you can’t pay back the debt that you borrowed to buy your house, then ultimately the lender who lent you that money has the right to repossess your property in order to recoup its cash.
But they can’t do this unless all reasonable attempts to resolve the situation have failed, according to the Financial Conduct Authority.
“Lenders ultimately don’t want to repossess your property – they are in the business of collecting money and interest,” Nick said.
“But if a borrower doesn’t contact their lender, the lender has no choice but to follow through with this process.”
If you ask for help from your lender, you could be able to extend your mortgage term, which will help lower monthly repayments, take a payment holiday, or just pay off the interest on your loan for a while.
Cut your outgoings
After you’ve talked to your lender, look at how you can minimise your monthly outgoings.
It means you can free up money to pay your mortgage.
“Stop all non-essential expenditure to maintain a roof over your head,” Nick said.
You could consider options to raise cash too, such as renting a room out.
Under the Rent a Room scheme, you can earn up to £7,500 per year – which is roughly £625 a month – tax-free.
But you must ask your lender permission beforehand – as it could go against your mortgage terms.
Make a budget to track your outgoings and income.
Ready-made budget planners, like this one from Money Helper, can get you kick-started.
Get advice
Falling behind on your mortgage repayments can be very scary – especially as this puts you at risk of losing your home.
But you can get free help and guidance over what steps you should take back control of your finances.
“Try getting advice from Citizens Advice and other charities that offer financial advice,” Nick said.
Citizens Advice is also available on 0808 800 9060.
It is a free and impartial service, and it can help you come up with a plan to getting on top of your debt including which payments to prioritise and how to reduce your living costs.
You can contact National Debtline on 0808 808 4000.
An adviser will ask you about your income and spending, so try and have as much information to hand as possible when you call.
Self-employed workers can also get help through Business Debtline.
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Step Change can be contacted on 0800 138 1111.
It can talk you through different options such as debt management plans (DMP), individual voluntary arrangements (IVA), bankruptcy, and debt relief orders (DRO) if they are appropriate.