With mortgage costs rising every year and cost-of-living crisis to continue, people are having their finances so messed up that they are struggling to pay their bills and debts. If you currently hold a mortgage, this financial crisis can lead to problems making monthly mortgage repayments.
Despite popular belief, notifying your lender that you are experiencing trouble making your mortgage payments does not automatically result in your home being seized. Lenders are aware of the growing number of individuals struggling with tight household budgets, and they will make every effort to assist if they are made aware of a problem. Your chances of finding a solution to your financial problems increase the sooner your lender is aware of them.
If you are having trouble paying your mortgage, you have three major options, and the best one for you will be determined by your specific circumstances.
1. Increase the duration of your mortgage term
If you are having financial troubles, you may be able to extend the duration of your mortgage term. This will reduce your monthly payments and allow you more time to repay your mortgage. You should contact your lender about this option as soon as feasible.
Extending your mortgage term may increase the total amount of interest you pay over the course of your loan, so only consider it if you are confident you cannot afford your existing monthly payments.
2. Switch to an interest-only mortgage
Switching to an interest-only mortgage can help you reduce your monthly payments and gain financial flexibility. However, there are a few things to consider if you’re thinking about this alternative. While an interest-only mortgage lowers your monthly payments, it also means you’ll owe more money at the end of the loan term. You’ll need to have a plan in place for paying off the remaining balance.
This may affect your capacity to refinance or sell your house in the future. If interest rates rise or property prices decline, you may owe more than your home is worth.
3. Request a payment holiday
If you are having financial difficulties, lenders will seek to see whether they can offer you a payment holiday of up to three months. This should give you some breathing space to get your finances back on track. In case, you’re thinking of taking a mortgage payment holiday, talk to your lender first. They will be able to advise you on the best course of action, as well as inform you of any costs or charges related with taking a payment holiday.
It’s also worth noting that taking a mortgage payment holiday will extend the term of your mortgage, so you’ll eventually end up paying more interest throughout the life of the loan.
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