Most first time home buyers purchase a house with the help of mortgages. There’s no problem with this method when you’re able to repay your mortgage on time, but it could become risky when your financial situation changes. In this second case, your house may become in danger of repossession.
Being a first time homeowner, it’s natural to be in a state of shock when you find yourself in this situation. But keep in mind that there are ways to solve this problem. If you follow the following strategies, there’s a chance that you’ll avoid repossession:
Keep in touch with your lender
Are you the type of person to hide away when things turn for the worse? If yes, make sure to ditch this habit when you’re having trouble with your mortgage payments.
When homeowners fall into arrears, lenders usually send them 2 notices. The first notice tells the borrower that he or she has missed several payments and advises them to either pay the amount or contact the lender. If you fail to answer to the first notice, they will send a second notice which tells you that the solicitors will start to get involved in the process within 7 days.
Don’t allow the situation to escalate to the point where solicitors would get involved. It pays a lot to contact your lender in times of crisis, because they can give you advice on how to mitigate the effects of your late payments.
Even Michael Cogan the Director General of the Council of Mortgage Lenders agrees with this opinion. He says that homeowners who contact their lenders are first sign of trouble are more likely to stay in their homes, since they’re able to negotiate an agreement that will benefit both parties.
So what are these options available for homeowners?
Your lender may offer reduction of monthly payments for a specific period, but this may lead to either of these 2 outcomes. First, an additional interest will be added into your total loan. Second, the term of your loan will be extended.
Lenders may also offer refuse to accept payments for a couple of months if they are positive that a change in your circumstance is possible in the next few months. A handful of companies also allow alternative options such as switching from a repayment basis to an interest-only mortgage and adding arrears to the outstanding mortgage.
Never ever give the keys back
Handing over the keys to your house will cost you more than the roof over your head. When you allow the lender to take possession of your house, the amount of your debt increases and your name will be listed in the on the mortgage repossessions register making it difficult for you to secure another mortgage in the future.
A better option for homeowners in times of trouble is to sell the house. Based on experience, owners get a better price for their house when they sell the house themselves; compared to when the lender sells it at a public auction.
Remember, when financial problems arise, don’t panic. There is always a solution to a mortgage problem and it helps being transparent with your lender and making it clear to them that you aren’t running away from your obligations.