88,000 are in mortgage arrears hell – that’s a town the size of Falkirk
SCOTTISH SUNDAY MAIL - 21ST NOVEMBER 2004
Your dream home will turn into a nightmare if you can’t keep up the payments.
Around 88,000 people across the UK had mortgage arrears in the fist six months of 2004. And that figure look set to rise on the back of five interest rate rises.
According to the Council of Mortgage Lenders, 650 Scots had homes repossessed in the first half of the year, a rise of 30% on the previous six months.
Here’s some tips on how to avoid the hell of repossession.
Don’t overstretch
Don’t borrow more than you can comfortably afford, bearing in mind rates could go up. Try to put some cash in a savings account and think twice before taking a second loan.
Simon Burgess, MD of insurance broker Burgesses said: “Mortgage companies jump through hoops to keep people in their homes.
“However, many people take out second charge loans secured on their properties then they can’t keep up the repayments. Second charge lenders are sharks and they don’t hesitate to repossess.”
If your home is repossessed and sold for less than you owe, you will still be liable for the outstanding debt.
Don’t rely on the state
If you lose your job or are ill, don’t assume the state will help. Only those eligible for Income Support will get help, which rules out anyone with savings of more than £8000 or a partner working 24 hours a week. Those with £3000-£8000 saved will get reduced benefit. If you qualify for full rate, payments will cover only interest on the first £100,000 borrowed.
If you took out your mortgage after October 1, 1995, you must wait nine months for this. For older loans, payments start after two but for the next four just half the interest is paid.
Protect yourself
Take out mortgage payment protection insurance, also called accident, sickness and unemployment insurance. It is charged at a flat rate and can be as little as £3.95 a month for every £100 of benefit, less if you don’t take the full range of cover. If self-employed, you should only pay for accident and sickness. If you already have income protection insurance or your boss has a good sick pay scheme, you may want only unemployment cover.
Most homeowners buy mortgage payment protection insurance from the mortgage lender, but brokers such as Burgesses are often much cheaper.
Tell your lender
If you’re having difficulties, tell your lender right away – most will negotiate.
They may reduce your payments by extending the term or changing to an interest only loan. Or they may let you defer part of the interest until you get back on your fee.
