Can’t afford mortgage & house not selling!
Can’t afford mortgage payments or house not selling or both! Just know you’re not alone. And also know there are people there to help you.
This week we are going to take a look at some options for you if you are struggling with your mortgage payments.
Let’s get into it.
Take action now
It can feel overwhelming when you can’t pay mortgage payments.
But hopefully you can take a little comfort from the knowledge you are not alone and that there are people out there who can help.
Some people bury their head in the sand. Don’t let that be you. Take action today.
Start by getting some advice.
Should you contact your lender?
Most lenders are going to want to help you as much as they can. It’s in their interests for you to be able to get yourself out of financial difficulty.
Calling in your loan or repossessing your house is a big hassle that they will want to avoid at all costs. In many cases, they will be able to help you.
Some people will say you should contact your lender immediately the minute you know you can’t afford mortgage payments.
I agree, you should contact your lender, but it can make more sense to wait until you have gotten some good independent advice first.
Whilst your lender should be able and willing to help you, they may not be able to provide you with the best option for your needs.
It’s nice to get some advice without fear of any consequences.
It’s also better to be clear about what your options are before you speak to your lender. Many people feel more confident speaking to their lender when they understand more about their situation.
It’s useful to know how your lender views people in your position before formally contacting them with your problems. There is often no reason to make them your first call.
And when you do contact them initially, there is also nothing to stop you doing it anonymously. More on this below.
Why you should speak to a mortgage broker first
If you can’t make your mortgage payments it is often best to talk to an experienced mortgage broker as soon as you can. Even the ones that charge a fee for finding you a mortgage will usually give you a free consultation before hand.
In many cases it makes sense to do this before you speak to you lender. Lenders give you the best deal for them, whereas good mortgage brokers should get the best deal for you. Sometimes these are the same, but other times they are different.
There are all kinds of ways mortgage brokers can find to reduce your monthly payments. Switching lenders, extending mortgage periods, going from fixed to variable or even interest only.
They may also be able to give you some valuable background information about how your lender treats people in your situation.
Speak to the citizens advice bureau
When you struggling with you mortgage another option is to get advice from the Citizens Advice Bureau. They have experienced advisors that you can talk to for free.
And whilst, they may not have the financial know-how that a mortgage broker has, they should have experience with other people who are struggling to pay mortgage debt down.
They should also be able to tell you if there are any schemes or government benefits available for people in your situation and be able to offer advice about budgeting and reducing costs.
Get some free advice
As well as the Citizen’s Advice Bureau there are a few other places you can turn to for advice when you find yourself in financial difficulty.
And as with Citizen’s Advice Bureau, each of these are free:
When and how to speak to your lender
Different lenders have different measures in place for clients who run into mortgage payment difficulty.
They maybe able to give you a break or simply change your deal to another one with lower monthly payments that you can afford.
Often this is done by extending your mortgage period or switching to an interest only product.
Your lender may have something suitable for you, but at they same time they might not. That’s why many prefer to get some independent advice first.
Other’s simply don’t want to let their lender know they are having difficulty making payments on their loan before they have to.
The thing is, you don’t need to let them know you are struggling before you’ve got a clear idea about what your options are.
Rather than letting your lender know you are struggling to pay mortgage payments you can contact them anonymously and get an idea whether or not they can offer you the help you need.
Some prefer to get a friend or family member to do it for them.
The more you can understand about how your lender treats people in your situation the better.
Then when you are ready you can formally contact your lender to see if they can help you (that is if you still need to).
Cutting costs to free up cash
As well, as getting advice there are some other concrete steps you can take which may ease your debt burden.
This first one can sound a little patronising but some people just don’t think about doing it so it has to be mentioned.
If you can’t afford your mortgage payments with your current outgoings can you remove some of them. In other words, are there any costs you can cut back?
I appreciate some people have already cutback to the bare essentials but the fact of the matter is, others won’t have.
You maybe surprised how much you can save if you work out your budget. There are plenty of free tools out there to help you with this.
Two of the more popular ones come from Citizens Advice Bureau (CAB) and Money Helper.
And CAB talk about reducing regular living costs here if you are interested.
Remember, this may only be temporary.
Find additional income
Along the same lines as cutting costs, mentioning additional income can be a bit annoying for many people. Most people are earning as much as they can right now.
So I appreciate most people won’t be in a position to do this, but I will just mention one option that people do often overlook and that’s room rentals.
You let one or more rooms of your house out.
I’ve know of a family in a two bed flat that all crammed into one room together so that they could let the other room out.
Whilst it can be inconvenient, you maybe surprised just how much money you can get for doing it. In case you are wondering they did it for 3 years!
Definitely worth thinking about if you have rooms available.
Can I pay mortgage by credit card?
Desperate times call for desperate measures and one of these would be paying your mortgage by credit card.
It’s not usually recommended because at best it is more expensive to do it that way. At worst it can get you into even more financial trouble.
That said, some lenders may let you pay your mortgage by credit card, but they don’t usually like it. And if they did allow it, it would flag up your difficulties.
Lenders know the interest payments on your credit card will usually be higher than the interest on your mortgage payments so it indicates you could be in financial trouble. Essentially, it costs you more to do it this way.
If you don’t mind them knowing you could ask them if it was OK. If you had a good excuse for why this was a temporary affair I’m sure most lenders would consider it. Otherwise be prepared to tell them the extent of your troubles.
If you go ahead with using your credit card just make sure it is a temporary solution, because you could find yourself getting in even more financial trouble by going down this route.
Letting your property out
If you’ve explored all the options above, there may be another one to consider before you move on to the idea of selling your property.
Letting your property out could be the solution to your problems. Of course you then have the problem of where to live, but in many cases you should have options.
Moving in with family or friends or finding a cheap place to rent yourself could give you enough of a cushion to make up your mortgage shortfall.
It doesn’t have to be forever. Just until you get your finances back in order.
Can I rent my house out if I have a mortgage?
If you do rent out your property, just be aware you aren’t supposed to let your home out on a standard mortgage.
There are essentially three options available to you to deal with this.
- Gain consent to let from your current mortgage provider
- Convert to a buy to let mortgage
- Let your property out without notifying your lender
Mortgage companies will often give you consent to let. With this you let your property out on your current mortgage deal for a small annual fee. This is usually going to be the most straight forward option for most people.
Having said that, this could be another one of those situations where you might want to get some advice first and perhaps contact your lender anonymously to ask them what their rules are about this before speaking to them formally.
There maybe some reason why they wouldn’t do this for you. It may also be the case that a BTL mortgage with another lender could give you cheaper monthly payments.
Talking to a specialist mortgage advisor first could again be useful here. They maybe able to find you a better deal than your current lender.
Can you let your property out without notifying your mortgage provider?
A third option would be to just go ahead and let your property out without notifying your mortgage provider at all.
Just to be clear, I’m not recommending this, I’m just making you aware that it is an option. I do know that people do it and I’m pretty sure if I had to choose between losing my house and taking the risk of getting into trouble if they found out, I may take the risk.
The risk here is getting caught committing mortgage fraud and that definitely sounds serious. I’ve never heard of anybody whose been convicted of this but a quick scan around the internet suggests typical punishments would be fines, raising your current rate or even calling in your loan.
So it’s worth saying it again. I’m not recommending this, but it is an option and it’s an option that people do sometimes choose.
Should you sell your house if you can’t afford your mortgage payments?
The final option you can think about if you can’t afford your mortgage payments is selling your property.
In many cases people either downsize to a smaller a property in their current area or move to a cheaper location.
Both of these can be good options no matter whether you rent or even buy with a more affordable mortgage.
House not selling
Of course you may find your house not selling quick enough. If that does happen there are things you can do to speed up the process.
First and foremost is choosing a good estate agent.
It’s always tempting to go with the agent that says they can get the highest price for your house, but that’s not always the best way forward.
If you need the money quickly or are trying to sell in a buyers market you need to ensure your property is priced competitively from the start.
If you aren’t careful, you may end up following the market down.
This happens when you are forced to keep reducing your asking price but always remain a step behind the market. Never quite reducing the price enough to get the sale.
In other words, a lower price in the beginning can often end up being higher than what you end up getting later on.
So an agent is key here. You need somebody who is realistic about the price they can get for your property. If it’s overpriced it may not sell. This is particularly true in a buyers market.
If you do find yourself in that environment it may pay to go with the old timer!
You really need an agent who is experienced in this kind of environment. The fact of the matter is, some agents won’t have experience of anything other than a booming market.
Think about it this way, the last time we had a real down market was 2008. That means you probably need somebody at least in their mid to late thirties.
Anybody younger than that won’t have experienced selling houses during the bad times!
How to speed up a house sale
Nine times out of ten, a good experienced estate agent will be able to sell your house for you as long as you are realistic on price.
However, that isn’t always the case. If you are really struggling to sell your home you may need to take additional action.
There’s a general guide about selling your house quickly here but you may also want to consider quick house sale companies.
These companies will buy your house quickly for a discount.
There’s a more specific guide about those here if you are interested, but in general, you need to do your research and find a good company that you trust so that the discount isn’t bigger than it needs to be.
Can’t afford mortgage and house not selling – the bottom line
If you can’t pay mortgage payments now or your house isn’t selling, know that you are not alone and also that there is help out there for you.
Don’t bury your head the sand. Get some advice. Get a plan together and start taking action now.
