Five ways to avoid mortgage arrears

While many real estate markets around the world are going from strength to strength, the fact remains that austerity measures implemented by an array of governments are impacting the household income of many families. In some cases this is starting to put pressure upon mortgage payments and indeed many people are now in arrears with their mortgage or on the verge of financial troubles.

We hereby list five ways in which you can look to reorganise your finances to ensure that you are able to pay your monthly mortgage liabilities.

Is it time to downsize?

If you are heading towards mortgage arrears and serious financial problems then perhaps one option would be to downsize or at least release equity from your property. This is not the first option, but it is certainly an option, and one which too many people are afraid to consider for a number of reasons such as pride. They say that “pride comes before a fall” and unfortunately this is a term which is very relevant to those moving towards serious financial issues and potential mortgage arrears.

Quote from PropertyForum.com : “A number of media outlets have been reporting an increase in real estate get rich quick schemes which seem to be tempting those looking for long-term financial stability.”

Let’s not forget, many people have families who have flown the nest, started a life of their own and purchased their own property. This will reduce overall household income and many areas of your home could be seriously underused. If you no longer require a relatively large property there are a number of reasons why you should potentially consider downsizing.

Review monthly spending

Sounds simple? Well, how many of us have ever really taken a look at where our household income goes on a month by month basis? Many of us will be living lifestyles today which may have begun many years ago and have not been realigned with the economic situation or indeed our household income. Sometimes you may be able to squeeze additional capital from your monthly spending by reducing your social activities, perhaps consolidating outstanding debts and looking for cheaper options.

This may sound simple, and it is, but there is the opportunity to realign your expenditure and ensure that you have more than enough to cover your mortgage liabilities.

Realign your investments

You would be surprised to learn how many people are struggling with their mortgages yet regularly contribute to save as you earn schemes, collective investments or other similar plans. If you are struggling in the short term to cover your mortgage liabilities and you have any investments to hand then it would make sense, at least in the short-term, to ensure you can cover your short-term liabilities first and then look to rebuild your long-term investments in the future?

The likelihood is that your mortgage provider would immediately suggest a realignment of your investments so that you are able to cover your short-term liabilities. However, if you are able to do this yourself before you reach any financial trouble with your mortgage then this would reduce the pressure on you and your family and allow you to at least look to the longer term with hope.

Tackle the problem head-on

While many people will suggest that their mortgage arrears suddenly “crept upon them” the reality is that the vast majority of those with mortgage arrears will have been steadily moving towards this situation for some time. The quicker you are able to see potential financial problems going forward the more time you will have to react and perhaps the less pressure will be exerted on both your mental and your financial state.

There is no point in burying your head in the sand and assuming the economy will pick up, the property market will bail you out and your mortgage arrears will disappear. Unless you are willing and able to tackle these head-on they will only get worse in the short-term and relatively small tweaks at the first sign of trouble may not be of any use in the medium to long term.

Speak to your mortgage provider

Those heading towards mortgage arrears, and those in mortgage arrears, are very often frightened to speak to their mortgage provider over concerns they could make the situation worse. The simple fact is that you should speak to your mortgage provider as and when your financial situation changes and indeed you should have an annual review of your overall investments and financial situation. If you take a step back and look at this from a distance, it is in the best interests of your mortgage provider that you are able to cover your mortgage liabilities going forward and any short-term changes would be considered.

If you are experiencing short-term difficulties with your mortgage liabilities then there are options such as payment holidays or indeed releasing some equity from your property could tide you over in the short-term. These are situations which should be discussed with your financial advisor and your mortgage provider to get an overall picture and a number of solutions for the future.

Conclusion

If there’s one simple piece of advice we would give you it is to act as quickly as possible if you feel as though your financial situation is changing and you foresee problems with your mortgage payments. Speak to your provider, review your finances and look at all of your investments to ensure as much short-term pressure as possible is released. There is no point looking to the future in the knowledge that you have investments which will help in the years to come while you may lose your house or suffer extreme financial hardship in the short-term.

Finding a balance between your income, expenditure and mortgage liabilities is fairly simple in theory and even if a review highlights potential long-term problems, there are options available.