Welcome to another of our Quick Property Sale blogs, we hope you enjoy this article, if you wish to suggest a topic for us to write about please do get in touch.
How do people so easily get into money arrears?
Have you fallen behind with your home utility bills and mortgage payments? It’s worth taking a moment to think about the question – whether you are, or are not, in that situation or heading in that direction. Sometimes, dealing with the causes and taking action now will help to resolve the problem, or do away with it altogether.
The majority of uncontrollable debt has it’s root causes in burdening mortgages (perhaps a fixed term mortgage product is ending), loan or credit card bad management or even the added cost of recent higher fuel bills. These can get out of control and to a point where they become unaffordable due to an unexpected change in circumstances, or basic poor household financial planning. Using and implementing a ‘household budget planner’ will not cure your immediate money issues, but it would help to prepare a future insight to your home’s cash flow. Once you adopt a budget planner we think you will find it easier to see where your finances need to be applied.
Let’s look at some possible common causes
There may be short term or more permanent reasons why people find themselves unable to maintain day-to-day control over their home finances including:
– A drop in income: there are plenty of ways this can happen, including a change of job, redundancy, loss of overtime earnings or a reduction in working hours or wages, or even cuts to social welfare benefits or possibly loss of child benefit.
– An increase in the cost of living: a new born to the family, the costs of raising children, rising travel or utility costs and the recent explosion in food prices.
– Divorce: separation can impact dramatically on the family household stability and associated finances.
– Illness: an accident or unexpected deterioration of a family member’s health.
– Bereavement: a death in the family can reduce any household income and could add the stress of paying for a funeral too.
– Using income to cover other financial obligations. People divert funds to pay off other debts, such as personal loans, credit cards and/or overdrafts, which may seem more pressing, but are not in truth.
– Having to deal with a one-off financial issue. These could include an unexpected vehicle repair, repairing uninsured property damage or serious illness.
– Increase in scheduled mortgage payments due to the recent mortgage interest rate hikes, or because a fixed mortgage deal has expired.
– Changes in lifestyle: self-gratification living and spending beyond your means could lead to a build-up of bad debt.
Going through this list, how do you think you got into debt originally? Looking at the initial cause of the problem is useful in determining if this is a temporary or long term situation.
What you could do if this applies to you and how to go about it
As soon as you become aware that you are not able to service all of your current bills in full and on time, you should consider notifying your mortgage lender and the relevant card/loan companies. Again, it’s good to talk. Contact the people you owe money to and explore options for solution, for example, a mutually arranged payment holiday, the freezing of interest or temporarily reducing your monthly payments.
Your mortgage lender has a vested interest in sorting out at an acceptable remedy. They have an obligation to deal with your situation reasonably and fairly. It also makes sense for them to resolve the situation, rather than go to the expense of them of forcing repossession. There are certain guidelines for mortgage lenders before they can go after repossession for mortgage arrears.
When homeowners get into difficulty paying their mortgage, or necessary associated costs, there is often help available to ensure that you can get over any temporary debt problems (please consider the budget planning guidance help links below this article). If problems with mortgage payments continue, however, it is possible that the homeowner may have to consider selling. It’s drastic but it can be better than repossession. Making an appointment with a mortgage broker could help with finding a fresh affordable mortgage product, provided you do not have to pay any exit penalties on your current mortgage.
With credit cards it is possible to amalgamate debts into a single payment whereby the credit card offers a zero per cent term. Personal loans can be amended, with the creditor’s approval, to pay your debt over a longer term which would reduce any monthly payment.
In all instances, it is best practice to seek help rather than bury your head, being pro-active pays dividends in the end.
Helpful ‘budget planning’ links to read and use:
(Credit source: Money Helper)
(Credit source: Money Saving Central)