Mortgage can’t be paid
What happens if a mortgage can’t be paid?
When it comes to mortgage payments, they’re often described as one of the most important on the list of bills to be paid. While everything from council tax to utility bills is important, it’s also true that mortgage payments need be placed high on the list of priorities. If mortgage repayments are not made on a regular basis, the consequences can be severe – and in serious cases can even include repossession of the home.
However, in some situations, mortgage repayments simply can’t be made. What happens if that applies? It’s not necessarily the case that repossession will follow tomorrow, and there could be some solutions to explore to remedy the situation. This article will explain what they are and how they may be able to help you if you were to find yourself in this situation.
Alternative streams of income
Often, the primary reason why a mortgage lender ends up attempting to recall their loan and sell the property is because the income stream of the primary person who is supposed to be paying the loan dries up. This could come in the form of a job loss, for example, or it could be due to the drying up of other income streams.
For that reason, it may well be possible to save a mortgage by ensuring that you find another way to pay, even if your primary source of income dries up. In the event of a job loss, for example, having some sort of alternative income – perhaps through self-employment or something else – is worth pursuing. Alternatively, if you are renting out your property with consistent returns, channelling some of these into an account to cover dry spells may be wise.
Speak to your lender
If you’re experiencing financial difficulties which you cannot fix for whatever reason, speaking to your lender is often a wise course of action. In theory, at least, mortgage lenders don’t actually want you to default. They would rather that you did not cease to pay overall, so if you can confirm that you’ll be able to pay at some stage in the near future, they may be willing to agree to a payment holiday.
However, the patience of a mortgage lender will not last forever, and you may end up finding that you have to make a more significant decision. Lenders ultimately want their investment back, but they won’t wait around to do it on your terms. If you can’t pay after a few weeks or months, they may instigate repossession proceedings – so it’s worth thinking carefully about whether or not a payment holiday of a month or two is a realistic solution before you ask for it.
Sell your property
As a property owner, the ultimate defence you have against the potential future lack of ability to pay a mortgage is the ability to sell your home. This works on the basis that the equity in your home is something of a cushion, and that it can protect you in hard times. This is, of course, not nearly so simple. If you don’t have a decent amount of equity in your home, for example, selling up could merely end up being a way for mortgage lenders to cash in – and that could preclude your ability to retain any value from your home.
For those who have some equity left in their property and are looking to realise it in one way or another, selling up is often the best way to do it. This might involve speaking to a cash buyer, or if the mortgage company is on board, then it could entail going through the traditional channels to get to a stage at which the home can be sold conventionally. Either way, the key is to communicate with your lender and – hopefully – come to a mutually satisfactory conclusion.
Let repossession happen
In most cases, repossession is not a desirable outcome. The primary reason for this is that when a home gets repossessed, the repayment priority does not work in favour of the borrower. The lender is usually the first one to get paid back, and from the homeowner’s point of view, this could mean that the consequence is a loss of any and all equity in the property. The lender will seek to permit repossession to go ahead so that they can recover as much of the amount lent out via a mortgage as possible – and on some occasions, this could mean a wipe out of the value of payments made over the years.
This is not desirable for many people, although on some occasions it really is the only option. If there is no other way to meet the demands of the mortgage, repossession could be the best course of action. It can release a person from their obligation to pay their mortgage, especially if the mortgage lender decides that a sale can release a significant amount of value to them. This can in turn, allow the borrower to become more free – and while it can cause problems for the borrower in some circumstances, it can also liberate them from their obligations and help them to become more financially independent in the long term.
Not being able to pay your mortgage may seem on the face of it like a terrifying prospect, and it is one which for many people is a serious concern, but there are ways to prevent yourself and your family from falling victim to it. The first is to be certain that you have the alternative means to cover the payments in the event of a sudden event such as a job loss – and by keeping a direct line to your mortgage lender open, you may be able to negotiate a payment holiday or a sale.
If the thought of selling leads to worries and problems, NPT is here to help. Check out this link to see how we could assist you when it comes to getting your house on the market.