Keeping up with mortgage repayments
Whilst it is obvious to most people that if they do not keep up with their mortgage payments they risk loosing their home, there are many people who do not take sufficient precautions to minimise the possibility of repossession orders being made against their home.
Taking out a mortgage is probably the biggest financial commitment most of us will make, in terms of the amount that is borrowed, and the length of time it can take to repay the mortgage. Such large commitments need to be considered carefully. For example, some points to consider about keeping up with your repayments:
You can afford your mortgage 'today', but what if your income falls?
Many of these can be insured against, but it requires planning ahead and ideally advice from and Independent Financial Advisor.
What if interest rates rise?
These are just some of the points to consider when planning to take out a mortgage.
Types of interest rates and mortgage features
Choosing between interest rates and other mortgage attributes on offer can be confusing. How do you know which interest rate is best for you? And should you get a flexible, offset or normal mortgage?
So, what type of mortgage should you consider? You have two important decisions when choosing a a given mortgage interest rate package; whether to choose a fixed or variable rate mortgage, and whether to choose a short or long term deal.
Standard Variable rate - (Interest only or repayment mortgage) Your payments go up or down when the lender's mortgage rate changes. (Mortgage rates tend to move in line with the Bank of England base rate but there is sometimes a delay).
A 'tracker' (changes in line with a base interest rate), or tracker mortgage - A variable rate loan where the interest rate is a set amount above or below the Bank of England or some other base rate and so always 'tracks' changes in that base rate.
Fixed interest rate (limited period) or fixed rate mortgage - Your payments are set at a certain level for a set period of time - for example, two years, five years, ten years or even longer. Unless the rate is fixed for the term of the mortgage, you are usually charged the lender's standard variable rate at the end of the fixed rate period.
Discounted interest rate - Your payments are variable, but they are set at less than the lender's standard variable rate for a set period of time. At the end of this period you are usually charged the lender's standard variable rate.
Capped rate - Your payments are variable and often linked to a base rate, but fixed so that they do not go above a set level (the 'ceiling' or 'cap') during the period of the deal. At the end of the period, you are usually charged the lender's standard variable rate.
Collared rate - May be used in conjunction with a capped rate and/or a tracker. Your payments are variable but will not fall below a set level (the 'collar' or 'floor').
Standard variable rate with cashback - Here the bank or building society will offer you their standard variable rate but also an inducement to take on the mortgage by providing you a 'cash back' payment. Such payments are normally linked to a minimum period that you must remain with the lender, early redemption of the mortgage will usually result in paying back some or all of the 'cash back' payment.
How much should you borrow for your mortgage?
Most of the major banks and building societies will allow you to borrow up to three and-a-half times the main earner’s income before tax, plus one times any second earner’s income, or alternatively two-and-a-half times their joint incomes (if this is larger). There are some specialist lenders who will provide mortgages on higher income multiples but often this comes with higher mortgage costs to offset their risk.
Your lender may only count half of income such as overtime, commission or bonuses unless this is guaranteed. Lenders will reduce the amount they will lend if you have substantial outgoings such as other loan payments.
If you are getting advice, the mortgage adviser has a duty to take reasonable steps to ensure that you can afford the mortgage that they recommend. Whether or not you get advice, lenders are required to lend responsibly. This means that they should, based on things like your income, expenditure and other circumstances, consider whether you can keep up with the mortgage repayments now and in the future; for example after an initial discount period comes to an end.
Trying to sort out your mortgage debt
What can I do to sort out my debts?
If you have a debt problem or mortgage difficulty it is best to face up to it sooner, rather than later. Take steps to sort it out, for example:
• Work out your budget and decide how much you can afford each week or month to pay off your debts, putting priority debts at the top of the list.
• Contact all your creditors as soon as possible. Explain the problem to them and how you intend to pay;
• Offer to pay off the debt at an amount you can afford, even if it's only a small amount per week or month. Most creditors know this is exactly what a court would order, so they will have little to gain by taking you to court.
• Cut out all unnecessary spending and cut up any store cards and credit cards to reduce the likelihood that you will run up more debts;
• Can you increase your income - eg by working more hours, taking in a lodger, claiming benefit?
• Consider switching to a basic bank account that doesn't let you overspend but check also that you will still be able to carry out all the transactions that you need to.
Don't struggle alone if you need mortgage help. There are lots of agencies that can help you sort out your debt problems or help you to find somebody who can. These include Citizens' Advice Bureau and the Consumer Credit Counseling Service.
Do you need to sell house quickly?
If your debt or mortgage difficulty becomes too great for you to manage then RepayMortgage can help. We specialise in quick house sales as we have the financial resources to complete sales in as little as 7 days. We purchase all types of property in any condition and with or without tenants. We also offer a service where we buy and then rent back your home with the option for you to repurchase it at a later date when your financial situation has improved.
If you need to pay off your mortgage debt and "sell house fast" we can help you. We do not charge any fees, we pay for surveys and your reasonable legal fees. On top of this we will offer you a top price for your property, normally between 75% and 90% of the current market valuation. For information about how to acheive a quick house sale << click here.
For the current news and views on UK hosue sales and mortgage interest rates read more here >> UK house sales market
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How to Sell my house fast ... with RepayMortgage.co.uk
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