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Mortgage arrears

Mortgage Arrears:
How to Hold onto Your House

US housing costs may be at an all time high but that is no consolation if you find yourself unable to pay your mortgage. The economy in the US at the moment has led to many people facing higher interest rates which quite simply can make it harder for them to make their monthly mortgage payment. This can lead to them having mortgage arrears or making late mortgage payments.

The problem here is that once you fall into mortgage arrears or get in the habit of making late mortgage payments, then it can be very hard to dig yourself back out again as the situation just gets worse month after month. And, you have the additional stress of knowing that your mortgage lender has the right to have your home repossessed if you fail to meet your repayment commitments. However, this does not have to be the only outcome; there are solutions out there to help you hold onto your home and dig yourself free from mortgage arrears.

The first step you need to take is to talk to your lender and to talk to the company early. The majority of lenders will be more than sympathetic if you tell them that you are having problems before you rack up months of mortgage arrears or late mortgage payments. If, however, you don’t ask for your lender’s help, then it is far more likely to go down the repossession route.

There are various ways that your lender may offer to help you deal with mortgage arrears and get back on track. Not all lenders will offer all solutions, but they will all have some kind of option that can help you repay your debt and hang on to your home. Solutions here include:

  • Lowering repayments. Some lenders may allow you to make smaller repayments every month for a set time-frame to help you sort out your finances. You’ll then be expected to go back to normal repayments and to pay off your arrears.

  • Rolling arrears back. Another option is to roll your mortgage arrears back into your mortgage. Here your mortgage will be bigger but you’ll have sorted out your mortgage arrears and your repayments won’t necessarily be significantly higher.

  • Extending your term. Some lenders will help you by allowing you to extend your mortgage term (i.e. the number of years that it lasts). This will automatically cut the cost of your repayments every month.

  • Changing mortgage deals. You may find that changing to a different mortgage deal (i.e. fixed rate or interest only) will cut the cost of your repayments.

You can also use an impartial debt counselling service to help you get your finances back on track. Try to avoid talking to debt counsellors at this stage who want to sell you other loans or products; at the moment you simply need advice to help you figure out the best solution. The advantage to talking to a counsellor is that he/she can help you look at your finances as a whole rather than just concentrating on your mortgage repayments. A counsellor may also be able to talk to your mortgage lender on your behalf if you would prefer.

The key thing to remember if you are having problems with mortgage arrears or late mortgage payments is that you shouldn’t stick your head in the sand and hope that things will get better. This kind of situation can be dealt with quickly and effectively, but it’s in your financial interest to try and sort out mortgage arrears or late mortgage payments as soon as you can. This way you stand a far better chance of holding on to your house.

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