If your income has dropped, you may be concerned about the affordability of your mortgage repayments over the coming months. While this thought can be a stressful one, there are options available to help you get through.
Talk to us and your lender
The first thing to do is get in touch with us and your lender as soon as you see trouble coming. If you can get ahead of the problem, and get a plan in place early, you’re more likely to stop your short-term worry turning into a major crisis.
Consider what you can afford
If you’ve only lost part of your income, you may still be able to continue to make part (or most) of your home loan regular repayment. Run through what you’ve got coming in each month, what money needs to be set aside for other expenses, and what you could realistically afford to have go towards your mortgage.
And of course, get in contact with us: we can help you work out your options and the most appropriate way forward.
Many lenders are offering the option of shifting to an interest-only term for six months, without any penalty or extra fee.
This means that you only pay the interest portion of your payments, you don’t actually pay down your principal amount. So, while your payments will stay up to date, the total interest increases. As a result, at the end of the interest-only period, unless you opt to extend your mortgage term, your repayments are likely to increase. And your mortgage may become more expensive in the long turn.
Also, keep in mind that the savings you’ll make in the short term may not be as big as you think, especially if you’re in the initial years of your mortgage (when almost all of your repayments is interest).
What about a repayment deferral?
Have you ever heard of ‘mortgage repayment holidays’ (or deferrals)? Some lenders are offering this option for a set period of time, to people affected by Covid-19. Also, choosing this option will not affect your credit rating.
The key thing to know, however, is that while you won’t have any payments for that period of time (usually, up to six months), you will still be charged interest. That means you’ll end up paying higher repayments at the other side of your “holiday” or you’ll be paying your loan back for longer.
In a nutshell, while ‘repayment deferrals’ can provide a much-needed financial respite in times of need, this option is not without drawbacks. Get in touch to learn more about this option: we can help you understand whether taking the stress off for now is worth that extra expense in the future.
If you’ve paid off a lot of your mortgage already, you may be able to restructure it back out over a longer term to reduce your payments. This will mean you pay more interest over the long run but will improve your cash flow situation right now, while still chipping away at your principal owing. Once again, we’re here to answer your questions.
If you’re within the age range in which it’s allowed, you may be able to apply for a reverse mortgage. This option can get a little complicated, so make sure you seek advice before opting for it.
In short, reverse mortgages do not require any repayments until the house is sold. But the compounding interest charged means you have to pay back a lot more than you borrowed. If you assume that house prices will continue to rise eventually, and aren’t too worried about your house’s value as your eventual legacy for your kids to inherit, this may be an option to consider. Please don’t hesitate to contact us to learn more.
Think outside the box
If you have a spare room in your house, would you consider getting in a boarder? What you might be able to charge for a room in your house could help you with your mortgage repayments. Giving up some of your personal space may be a sacrifice, but if it enables you to keep the financial pressure off, you may think it’s worth it.
Like to discuss this further?
Please give us a call today. You’re not alone – We’re here to talk you through the options available and help you take some of the stress away.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.