With another rise in interest rates announced early this month and the prospect of more in the pipeline, many homeowners will be struggling to meet their monthly mortgage repayments.
The Bank of England raised interest rates by a quarter of a percentage point on Thursday, taking its base interest rate up to one per cent.
That is the highest interest rates have been since 2009 and was the Bank’s fourth rise in a row, so for many, rises in mortgage interest rates are a relatively new phenomenon, with many never having experienced this kind of fluctuation.
What options are available?
Contact your lender as quickly as possible with all your mortgage details and give them an idea of your budget.
Extend the length of your mortgage term
If you are struggling to afford your mortgage due to higher bills, increasing your mortgage term could be a good option, as you continue to repay your mortgage. But you will pay more in interest over the total period of your mortgage.
How an interest-only mortgage can help
This is a good way to lower monthly payments but needs to be short term. As you will only be paying the interest on your loan each month, rather than paying down the actual debt, it’s a much cheaper option in the short term.
But your lender is only likely to want to do this for a limited period, as you will not be reducing the overall amount and, you will need to find a way to repay your mortgage over the longer term.
Defer your repayments
You can defer your mortgage and interest payments for a short period, typically two to three months.
After this period, the payments you missed will be added to your monthly repayments until you have made them up. This is often done over one to two years.
Request a payment holiday
During a payment holiday, the interest you do not pay during the holiday will be added to the overall amount that you owe.
A big drop in your income may be a reason to seek a payment holiday, but lenders will also want to be confident that you will be able to resume repayments once the holiday ends. The downside is this may impact your credit score.
What are the fees or penalties?
Lenders know that if you are facing financial difficulties, the last thing you need is extra fees or penalties, so you will not face any charges to change to a plan agreed with your lender.
But you may face penalties if you miss a mortgage payment without contacting your lender.
Is my home at risk?
Losing your home is always a possibility, but lenders see repossession as a last resort, so they will work with you to try to find a way to make your mortgage repayments affordable.
For help and advice on matters relating to the residential property sector, contact our expert team today.