Struggling with your Mortgage? 5 Ways to Keep Repossession at Bay

• Top Tips
• Published: 20 Jan 2009 in Money and Mortgages

Having your home repossessed is one of the biggest fears faced by homeowners, and as the UK enters a recession and unemployment soars, growing numbers of people will struggle to pay their mortgage.

Industry body the Council of Mortgage Lenders (CML) estimates that unless action is taken, some 75,000 properties will be repossessed in 2009.

But here’s the good news:

• Help is available in the form of Government schemes
• You can protect your mortgage repayments with MPPI
• You could reduce monthly repayments by remortgaging

So if you are struggling to keep up with your mortgage payments, here are 5 ways that could help keep repossession at bay:

1.   Support for Mortgage Interest (SMI)

Those struggling to pay their mortgage after losing their job may qualify for SMI if they are also receiving unemployment benefit. Under this scheme, the Government will pay the interest on the first £200,000.

The Government has also reduced the time people have to wait for it to kick in, from 39 weeks to 13. But exclusions do apply and not everyone will qualify for help from the scheme.

2.   Homeowner Mortgage Support Scheme 

People who do not qualify for SMI may be able to access the Homeowner Mortgage Support Scheme. People facing a short-term drop in their pay due to losing their job or even just their overtime, can apply to have some of their mortgage interest deferred for up to two years, with the money added to their overall debt.

The scheme is likely to help people where just one member of the household loses their job or where the loss of overtime makes the family budget too tight to manage.

3.   Shared Ownership

People facing repossession may be able to sell a stake of their property to a social landlord in a shared equity deal or even sell the whole home and rent it back.

This new mortgage rescue scheme allows struggling homeowners to sell their properties to not-for-profit housing associations, and then remain either as tenants paying an affordable rent or as owners after receiving a loan from the housing association to help cut mortgage costs. But it’s important to note that if you opt for the tenancy option, you will no longer own the home.

Some of these shared ownership schemes currently have only limited coverage and not everyone will be able to benefit. First port of call for advice on the scheme is your local authority.

4.   Mortgage Payment Protection Insurance (MPPI)

For those worried about how they would manage if they weren’t working, it may be worth considering taking out mortgage payment protection insurance (MPPI).

MPPI covers mortgage repayments if the holder is unable to work due to an accident, sickness or if they lose their job.

However, policies usually have to be in force for at least 120 days before the holder loses their job/pay and is able makes a claim. This is to avoid people taking out the cover after getting wind their employer is planning job cuts.

Once in force, the policies generally pay out for a maximum of 12 months. Most MPPI policies have fairly standard terms following an initiative by the Council of Mortgage Lenders, so the main area in which providers compete is price.

But, as with all financial products, it’s always important to read the small print, particularly as some policies exclude certain medical conditions and the majority will not cover pre-existing ones. 

If you’re interested in an MPPI, Confused.com can quote you on a range of competitive deals.

5.   Remortgage 

Despite the current credit drought, there are still some great mortgage deals out there. Remortgaging to a better deal could significantly reduce your monthly repayments.

Confused.com compares deals from every major UK mortgage lender, so why not see if you can reduce your monthly repayments to a more affordable amount.

Though take note, even if you remortgage to a cheaper deal, ensure you can keep up the reduced repayments or you still may face the threat of repossession.

Finally... 

...it’s worth knowing that lenders are required to treat homeowners with repayment difficulties fairly, and they will often be able to help you find a temporary solution to make repayments more affordable.

So, if facing repayment difficulties, your first step should be to contact your mortgage provider to see what they can do to help.