Mortgage arrears usually arise from a detrimental change in personal circumstances: Stop repossession by taking out mortgage insurance and seeking mortgage advice.
While you can manage missing unsecured loan repayments via a debt-free solution, mortgage arrears present a more significant challenge because you can lose the family home. It is important to seek debt counselling and mortgage advice at the first sign of financial difficulty.
Seek Independent Mortgage Advice
Receiving mortgage advice early on is invaluable for any homeowner. When problems do occur, you can often combine mortgage advice and debt counselling. Ways of saving money can be discussed, methods to make extra money identified, and a complete solution brought into action to stop repossession.
A High Mortgage Interest Rate with a Standard Variable Rate Mortgage
If it has been several years since the last re-mortgage, there is a strong possibility that the borrower is on a Standard Variable Rate (SVR). SVR only serves to help the lender as the rate is typically 2% or more above the Bank of England base rate.
It is possible to save money by getting a less expensive mortgage interest rate: Getting a tracker, or fixed-rate mortgage can save hundreds every month. For example, an online mortgage calculator reveals that a fixed-rate mortgage at 5.5%, as opposed to an SVR mortgage at 7.5%, would save a borrower at least £250 each month.
This additional sum could be the difference between affordability and mortgage arrears. It is often the accumulation of a small amount of money that finally causes financial difficulty. A re-mortgage alone could stop repossession from ever happening.
Extending the Mortgage Term to Help Stop Repossession
An extension of the mortgage term results in more interest being paid and brings the monthly repayments down. Stopping repossession is all about making life more affordable, and spreading the cost over a longer period helps achieve this objective.
An Interest-only Mortgage to Stop Repossession
With the lender’s permission, it may be possible to switch from a repayment to an interest-only mortgage. This would have the effect of reducing a typical £150,000 mortgage by over £300 per month
Loan Insurance to Prevent Mortgage Arrears
As a preventative measure, it helps identify the cheapest and most comprehensive sources of mortgage insurance: This would provide the insured with coverage in the event of unemployment, poor health, or an accident.
The insurance policy must be gone through with a fine-tooth comb, as some sources of loan insurance are full of loopholes that seek to escape providing assistance. Checking the T&C’s gives a potential policyholder the chance to make sure that the necessary coverage is provided.
The Wrong Loan Insurance
If the mortgage advice comes from a tied agent to a financial institution, opinions can be heavily prejudiced and tend to be more expensive; Some advice is even negligent or unlawful.
Several cases are currently going through the court concerning being mis-sold loan insurance. These are instances where customers have been sold loan insurance when they would never be able to claim. This included the self-employed and those above the maximum age of qualification.
If there is a possibility that loan insurance was mis-sold, it is possible to take legal action against the provider. This can result in literally thousands of pounds of compensation. If mortgage arrears are already a problem, you can use the compensation to clear them.
Sorting out financial problems early on is key to stopping repossession. Mortgage arrears can be tackled through a series of lifestyle changes or debt solution; provided things haven’t been allowed to continue to the point of no return. Seeking non-profit credit counselling cana prevent this situation from ever arising.