Struggling Homeowners Need To Talk To Banks

Many people are having difficulty making ends meet and one of the biggest monthly expenses of any household is the mortgage. However, this is probably one of the most important expenses to keep paying as if you don't it could mean not having anywhere to live.

People who are struggling with mortgage repayments need to talk to their provider as soon as possible, according to the Homeowners Advice Centre.

One way to help with your finances is to change from a traditional repayment mortgage to an interest only mortgage.

An interest only loan is used to purchase an asset that is unlikely to depreciate much in value and then it can be sold at the end of the loan to repay the debt. Usually these types of loans are used for second homes or properties bought to let. An interest only mortgage can reduce the value of your monthly repayment, which leaves you more money left for general living expenses. This means if you are going through a particularly rough time financially you can keep paying your mortgage and not worry about defaulting and possibly losing your home.

A financial advisor said if homeowners are interested in switching to interest only payments, they need to discuss this before they fall behind as most lenders will refuse to do this for someone who is already in arrears. He added this course of action is not a long-term solution.

If you continue to pay the interest portion of your monthly payment only, you will be liable for the full balance of the mortgage at the end of the term of loan.

Homeowners who are currently on fixed rate deals that are due to expire in the near future were also advised to assume they will not be able to remortgage and to start budgeting for repayments at a standard variable rate.

Recent research by a leading building society has found 32 per cent of mortgage holders would prefer to pay a higher rate with their current lender rather than risk being rejected by an alternative provider.

If you want to know more about mortgages why not ask AnswerBank at Business and Finance.