Ask Our Expert

Struggling with Mortgage Repayments

Have you got a burning money question? Our expert Chris Eagle is ready to help. Email him at OurExpert@CreditChoices.co.uk

Q ~ Dear Chris,

I am really struggling to keep up with my mortgage repayments and I don’t know what to do. What options do I have?

Please help,

Duncan, Giggleswick

On the subject of mortgage repayment problems, our expert says:

Hi Duncan...

If you are worried that you won’t be able to meet your mortgage repayments, the most important thing for you to do is to contact your mortgage provider as soon as possible.

Lenders have procedures for tackling payment difficulties and the sooner you let them know you are having problems, the sooner they can help. Identifying the problem early (rather than trying to brush it under the carpet) can make it much easier and less stressful to find a suitable solution.

If you are experiencing financial difficulties, there are various options your current provider may be able to offer you. These may include:

Extended Term – You may be able to extend the term of your mortgage, i.e. increase the period of time over which you will pay back your mortgage. This will reduce your monthly repayments but it means you will be paying off your mortgage for longer and will pay more interest overall.

Payment holiday – Your lender may agree to let you take a payment holiday, which would basically give you a break from making repayments for a set period of time, for example three months. This could be a good short-term solution, but bear in mind that the repayments that you don’t make will be added on to your existing mortgage and thus they will increase the amount of interest you will pay overall and may also increase the time it will take to pay off your mortgage.

Underpayments – Your lender may let you make reduced payments for a set period of time, increasing short-term affordability, however this too would lead to you paying more interest on your mortgage overall.

Interest-only – Switching from a repayment mortgage to and interest-only mortgage can greatly reduce your monthly repayments. This allows you to reduce your outgoings during a period of financial difficulty, however the longer you stay on an interest-only mortgage, the more interest you will pay overall. Furthermore, if you only have a small deposit on your house, by switching to an interest-only mortgage you could put yourself further at risk of negative equity if house prices fall.

New Fixed Rate Deal – Your lender may be able to offer you a new fixed rate mortgage with a lower rate of interest and thus lower monthly repayments.

Switching to a mortgage with a lower rate of interest is the ideal way to reduce your monthly payments, as it should not increase the amount you pay overall. In fact, getting a better deal could decrease the total amount of interest you pay.

Before you change your mortgage payment plan to any of the above, I would recommend that you compare the best mortgage deals on the market from providers other than your own. Search for the best fixed rate, variable and interest-only mortgages and bear in mind that you may be able to extend your mortgage term.

If you are assessing mortgage deals from providers other than your own, remember that your provider may charge you an exit fee if you move your mortgage, so make sure you find out what this charge would be and include it in your calculations.

If possible, you should explore all the options before making your decision.

Further help

If you are struggling with mortgage difficulties, there are several organisations that can offer you free, independent advice and help you work out what you can realistically afford:

The Citizens Advice Bureau (www.citizensadvice.org.uk) offers confidential advice by phone and face-to-face. Visit the website to find your local CAB.

The National Debtline (www.nationaldebtline.co.uk) provides information and resources for coping with debt on their website as well as a helpline on 0808 808 4000.

The Consumer Credit Counselling Service (www.cccs.co.uk) offers advice, support and counselling for anyone who is worried about debt. You can call the helpline free on 0800 138 1111