Problems with paying the mortgage

In today’s recession, paying the mortgage is the biggest expense on a monthly basis for nearly every household and is also the biggest worry for people.

With people’s income cut to the bone from pay cuts, government levies etc etc it is a tough environment that we all now find ourselves in. Previously banks wanted the full payment from their customers and that was it but due to the dire circumstances that we are now in the banks have now come up with temporary methods to help people in trouble.

The first thing that the bank will ask you to do is to fill out an income and expenditure file, this is the budget that I attached to my last article. When this is completed the bank will then assess a persons claim that they are unable to afford the full mortgage payment. It is advisable that you speak to ANY Financial Advisor before you approach the bank with your figures.

There are 3 methods that the banks will have to help people in trouble.

1.    Interest Only – This is the most common method used at the moment by people. You only repay the monthly interest due and none of the capital. The effect of this is that the monthly repayment is reduced by approximately 40%. The amount you have borrowed does not reduce as a consequence. Banks will normally allow this arrangement for 3 to 6 months and review it then. It is advisable and sometimes compulsory for you to revise your Life Assurance cover while on interest only.

2.    Term Adjustment – You may have decided when you first took out your mortgage to do it over a shorter term, if this is the case then the bank will allow you to extend the term of your mortgage. While you will pay more interest in the long term it will help by reducing your monthly payment and you can always shorten the term when your finances improve.

3.    Reduced Payment – This method is used when someone is in dire financial trouble, the banks will work with the person to work out the maximum amount that they can afford to pay. This is normally put in place for 6 months by the bank and is revised then at that stage.

The main thing to remember is that banks now have to negotiate with people who are in financial difficulty.

If you have any queries with regard to any of these please do not hesitate to contact me at johnmansworth@gmail.com or on 087 958 4676 and I would be delighted to assist you.

You can also contact me if you have any other questions in relation to financial matters at anytime.

John Mansworth is a Partner at Morrisson Mansworth Financial Services.  This business was started in 2004 and continues to  provide many Financial Services including Family Budgeting, Personal Budgeting, Life Assurance, Mortgages, Pensions, Redundancy Payments & Savings Schemes.

Morrisson Mansworth Financial Services are based at 50 Harbour Row Cobh and can be contacted on 087 958 4676.

Contact Morrisson Mansworth Financial Services today for your FREE FINANCIAL REVIEW.