What can I do to avoid payment default? What are the means of getting out of mortgage hell and still retain ownership

There are many reasons why a person would become unable to honor payments. Financial difficulties could be a result of low periods in your professional life, unforeseen events in your personal life and even accidents or illness that could prevent you from working and earning an income.

There are two sides or instances when you must employ a sound strategy, at the beginning of a mortgage, and provided you have not done so at the beginning, once you get into trouble and as soon as possible before you do.

Before trouble starts ...

Here are a few tips for you if you are about to get a mortgage, are remortgaging or just comfortable with the mortgage you have.

Do not overextend yourself. Even if payments are affordable to you now remember that in 20 – 30 years interest rates could rises and you could end up paying up to 50% more than you are or would be paying now.

Save on the side. Always have a savings reserve for unforeseen events. You never know how your professional life might go up or down in the future. Keep a savings reserve to at least cover a couple of months of mortgage payments.

Choose the best deal that you can get. Because a bad mortgage choice could mean a loss of tens of thousands of pounds over the life of the mortgage be sure to make the best choice. If by the time you choose your mortgage you will have read through our guides it almost impossible to make the smallest mistake.

Get Insurance! If you can afford it, getting insurance is probably the best way of protecting yourself. Read more in our mortgage insurance guides.

When you are in trouble or about to be ...

When you are aware that something will happen and as a result of that your finances will be weakened do not hesitate to contact the lender. A lender, contrary to common belief, will be more than wiling to help.

Your mortgage lender will probably offer you a payment holiday (surely he will do so if you have overpayments) if your problem is temporary or he might also be wiling to lower your interest rate if your finances have not decreased significantly but the situation will be permanent.

Other allowances your lender might make could include a mortgage term extension or the permanent or temporary switch to a interest-only arrangement.

We do not recommend a permanent interest-only agreement as it is very unlikely that you will be able to repay the remaining capital sum at the end of the mortgage term.

We also do not recommend taking out a second loan to cover the first because by doing this your problem will still be the same, the only difference being that it will be with another lender and probably more severe.

If your lender is not wiling to help or will not extend the appropriate amount of assistance try switching lenders provided a tie-in clause is not active. Once you get back on your feet and are eligible, get one form or another of insurance.

Final Word

If you are still unsure of what to do please see our other guides on mortgage lenders and mortgage possibilities or contact a independent mortgage adviser that will probably know what the maximum level of assistance your particular lender will be wiling to offer and will teach you how to negotiate up to that maximum level.