Coming to terms with the fact that mortgage payments are no longer realistically possible to maintain is an extremely important step to take. People see it as “defeat”, and it’s never easy to admit defeat, especially when you have a fighting spirit. But don’t think of it as “defeat”, think of it as “surviving”
Giving up on something as important as a home can be the most difficult decision you’ll ever have to make, especially if you’re responsible for a family. But this important decision could save the livelihood for you and your children.
There’s no room for stubbornness
The worst thing you can do in this situation is “hope” things work out for the best. Things rarely work out for the best when you’re relying on hope alone, especially in these situations. Letting the concept of “hope” fester in your mind is a common mistake made by thousands, and before you know it they’re receiving repossession notices. If you know you can’t make your payments, then it’s time to start making some changes.
Spot the early signs
You will know immediately when you’re struggling financially, because it’s not a hidden or cryptic puzzle. If you can’t afford something, you can’t afford something, it’s as simple as that. As soon as you experience difficulties with your mortgage, you need to ask yourself one question: “am I just having one bad month, or is this the start of many to come?” Like I said, there’s no room for stubbornness when you’re talking about something so important.
It’s easier to adjust or turn things around at the early stages of a problem; once you’re in deep, crawling out can be a painful struggle.
What are my options?
1) Talk to your mortgage lender
First and foremost, talk to your mortgage lender.
If they understand the severity of your problem, they might be able to do something to help, which may include:
- Temporarily lower your rates
- Help you switch to another policy, which is more cost-effective
- Give you a temporary grace period whereby you don’t need to make any payments
Lenders have been known to be accommodating during times of hardship, because generally speaking, it will cost them a lot more to repossess than to give you some breathing space until you get back on your feet.
2) Remortgage (if you’re eligible)
Not enough people remortgage, and consequently end up paying significantly more than they need to on their mortgage.
The mortgage market is extremely competitive, with hundreds of deals available, so it’s always worth shopping around for a better deal when you’re eligible to remortgage.
Being loyal to a mortgage lender is like being loyal to a shark. Needless to say, it’s pointless because you’ll get shafted regardless.
3) Switch to interest-only mortgage (if you currently have a repayment policy)
If you’re currently on a repayment mortgage plan, you might want to consider switching to an interest-only plan.
Most lenders allow you to switch between mortgage payment types quite easily.
This can reduce the amount you pay each month significantly, because you’ll only be paying the interest on your loan, as opposed to capital and interest.
Once you’re in a better position, you can easily switch back to a repayment plan.
4) Lengthen the period of your mortgage
A lot of lenders now allow you to lengthen the period of your mortgage.
So for example, if you have 15 years left on your mortgage, you may be able to stretch it to 20 years.
This will cause your monthly payments to decrease significantly. However, bear in mind that you will end up paying more interest over the lifespan of your mortgage. The illegibility of this option will also depend on your age.
5) Get a lodger
If you’re comfortable with the idea of having someone else live with you, why not consider getting a lodger for that extra income?
A lodger can easily cover half of your monthly mortgage payments, and they can be extremely useful for several reasons, including providing extra security.
6) Rent to Rent
What do I mean by ‘rent to rent’?
Basically, consider renting your house out *if* you know your rental income can cover your mortgage payments, or at least cover the majority, so you can cover the shortfall.
Meanwhile, you can move into rental accommodation that is within your budget (which may mean downsizing).
This solution offers you the luxury of keeping your home and gives you the opportunity to get back on your feet.
7) Sell to rent
If you know you won’t fall into the negative (red zone) after the sale of your home, you could move into rental accommodation.
Regardless of whether you make or lose money with the sale, you should receive a huge chunk of change. That’s a better option than getting repossessed.
8) Downsize your home
Perhaps you’re living in a property that surpasses your actual requirements.
If you have a 3 bedroom where only 2 bedroom are occupied, downgrading to a 2 bedroom might be a wise move.
House prices can drastically vary even with in a small radius.
Relocating doesn’t have to mean moving to the other side of the country. And more often than not, you can get a lot more for your money if you move a few streets over.
Relocating not only provides you with the opportunity to get some spare cash, but it can also provide you with bigger living space.
Disclaimer: I'm just a simple landlord blogger; I'm not qualified to give legal or financial advice. Any information I share is my opinion based on my personal experiences as an active landlord, and should never be contrued as legal or professional advice. For more information, please read my full disclaimer.