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How to Avoid Mortgage Arrears: Stop repossession with Mortgage Insurance

Whilst missing unsecured loan repayments can be managed via a debt solution, mortgage arrears present a greater challenge because the family home can be lost. It is important to seek debt counselling and mortgage advice at the first sign of financial difficulty.

Seek Independent Mortgage advice

Receiving mortgage advice early on is invaluable for any home owner. When problems do occur, mortgage advice and debt counselling can often be combined. Ways of saving money can be discussed, methods to make extra money identified and a complete solution brought into action to stop repossession.

A High Mortgage Interest Rate with a Standard Variable Rate Mortgage

If it has been several years since the last remortgage, there is a strong possibility that the borrower is on a Standard Variable Rate (SVR). SVR only serves to help the lender as the rate is typically 2% or more above the Bank of England base rate.

It is possible to save money by getting a less expensive mortgage interest rate. Getting a tracker or fixed rate mortgage can literally save hundreds every month. For example, an online mortgage calculator reveals that a fixed rate mortgage at 5.5%, as opposed to an SVR mortgage at 7.5%, would save a borrower £250 each month.

This additional sum could be the difference between affordability and mortgage arrears. It is often the accumulation of a small amount of money that finally causes financial difficulty. A remortgage alone could stop repossession from ever happening.

Extending the Mortgage Term to Help Stop Repossession

An extension of the mortgage term does result in more interest being paid, but also brings the monthly repayments down. Being able to stop repossession is all about making life more affordable and spreading the cost over longer helps to achieve this objective.

An Interest-only Mortgage to Stop Repossession

With the lenders permission, it may be possible to switch from a repayment to an interest-only mortgage. This would have the effect of reducing a typical £150,000 mortgage by over £300 per month.

Loan Insurance to Prevent Mortgage arrears

As a preventative measure, it helps identify the cheapest and most comprehensive sources of mortgage insurance. This would provide the insured with coverage in the event of unemployment, poor health or an accident.

It is vital that the insurance policy is gone through with a fine tooth comb as some sources of loan insurance are full of loop holes that seek to escape providing assistance. Checking the T&C’s gives a potential policy holder the chance to make sure that the necessary coverage is provided.

Mis-sold Loan Insurance

If the mortgage advice comes from a tied agent to a financial institution, opinions can be heavily prejudiced and tend to be more expensive. Some advice is even negligent or unlawful.

A number of cases are currently going through the court in relation to being mis-sold loan insurance. There are instances where customers have been sold loan insurance when they would never be able to claim. This included the self employed and those above the maximum age of qualification.

If there is a possibility that loan insurance was mis-sold, it is possible to take legal action against the provider. This can result in literally thousands of pounds of compensation. If mortgage arrears are already a problem, the compensation can be used to clear them.

Sorting out financial problems early on is key to stopping repossession. Mortgage arrears can be tackled through a series of lifestyle changes or debt solution, provided things haven’t been allowed to continue to the point of no return. Seeking debt counselling can prevent this situation from ever arising.

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