What are my mortgage options if my circumstances change?

How can a change in your financial circumstances affect your ability to make repayments on your mortgage

Published: June 3, 2019 architectural-design-architecture-colorful-house

No-one can foresee what will happen in the future, but you do not need a crystal ball to see that a change in your financial circumstances may affect your ability to make repayments on your mortgage.

Firstly, let’s take a look at what you may be able to do if things have changed for the better:

Received a pay rise, bonus or windfall?

If you are now earning more money than when you took out your current mortgage, it may be worth seeing if your mortgage product allows you to make regular overpayments.

By paying more than you need to, you could reduce the total amount you pay overall in interest and you may be able to repay the mortgage earlier than was originally scheduled.

If you have received a significant bonus or a windfall, again, you may be able to use it to make a one-off overpayment on your mortgage that could help you become mortgage-free quicker, and/or reduce the amount you pay out on interest in total on the loan.

Consider a remortgage

remortgage is where you take out a new mortgage on a property you already own to replace your existing mortgage. If your current mortgage has come to the end of any discounted period and does not have an exit fee, or it is not for a significant amount, it may well be worth considering moving your mortgage to a new one which offers a more competitive deal. Especially as you may now be able to afford higher monthly repayments which could reduce the term (length) of the loan.

An expert mortgage broker such as Loan.co.uk will be able to guide you through the options for you and your circumstances.

Do not panic if things do take a turn for the worse

Even if your financial circumstances change that make paying your mortgage an issue, pause for thought before doing anything; you may still have options and there will be actions you may take. However, gain professional advice quickly as a mortgage is a loan that is secured against your home, so in the worst-case scenario, if you fall behind with your repayments, your lender might want to sell your home to get recover their money. Yet there are a number of things that you can do to minimise the risk of this happening:

Tell your lender what is happening

No lender wants to see you lose your home, so inform them as soon as possible if something happens that affects your ability to repay your mortgage. That way they can take you through all the options that they are able offer you with your particular mortgage product and with your circumstances in mind. Depending on the lender, these options may include:

  1. Taking a mortgage payment holiday. 
    Although this may be limited to a breathing space of just one payment, it could give you valuable time to get things back in order.
  2. Extending your mortgage term.
    By spreading your mortgage repayments over a longer time period, the amount that your mortgage costs you each month will go down – the longer the term, the lower the repayments. If you have been given a large redundancy payment (for example), extending your mortgage term may help you to make this redundancy money last longer, giving you more time to find alternative employment.
  3. Come to a short-term reduced payment agreement.
    Again, this really will depend on the lender, but it may be able for you to look at just repaying what is affordable for a short period of time. However, even if this is possible, you will be expected to catch-up with your repayments as soon as possible.

Note that all the above options are likely to increase the amount of interest you will owe in the long run, so be sure to take advice on which action will be best for you.

Do you have savings that you use to keep up the payments on your mortgage?

If you have built up a bit of a savings safety net, congratulations on having the foresight to realise that it is a brilliant idea to have money put by for a rainy day. Because a mortgage is a priority debt, it makes sense to dip into any savings you may have to help you to stay up-to-date with your repayments.

If you just happen to be reading this article to gain ideas on what to do if things take a change for the worse in the future, try to choose a savings account that pays a decent rate of interest, but will still enable you to get at your money within a reasonable time frame so that you can withdraw money in time to avoid making late payments on your mortgage.

Do you have any payment insurance plans in place that could help?

When you took out your mortgage did you take out mortgage protection insurance? If so, this insurance could help you to make your mortgage repayments if your income has fallen due to being made redundant, or after suffering an accident or illness that prevents you from working. Check the small print to see if the policy is designed to help you in your particular financial circumstances.

See if you are eligible for help from the government

You may be able to gain assistance from the government to help meet your interest payments on your mortgage with Support for Mortgage Interest (SMI),

To receive SMI you will need to be receiving income support, income-based Jobseeker’s Allowance, income-based Employment and Support Allowance (ESA), Universal Credit or pension credit. However, legislation can change quickly at times, so please get expert advice on this as soon as possible.

However your financial circumstances have changed, for better or for worse, try not to rush into making a decision you may regret later, and above all, get expert advice on the best options for you.