Repossession is probably one of the last things you’ll be worrying about once you’ve safely secured your mortgage, bought the home of your dreams and finally moved in.
The harsh reality, however, is that more than 36,000 homes were repossessed by lenders during the course of 2011 and 2012 is unlikely to see much of a reduction in that worrying statistic, according to a recent report by the Council of Mortgage Lenders (http://www.cml.org.uk/cml/media/press/3142).
Of course, you don’t want to be worrying about becoming just such a statistic before you’ve even started to enjoy your new home, but if there should ever come a time when you default on your mortgage repayments, repossession remains an option your mortgage lender might take. If the debt is not repaid as and when scheduled, the lender has the right to apply to the courts for a possession order and you could end up losing the roof over you and your family’s heads.
So, what are some of the things you might do to avoid such an alarming fate?
Spend within your means
As with any kind of borrowing, of course, you would be well advised to ensure that mortgage repayment instalments remain within your means.
The particular problem with a mortgage, however, is that it is typically spread over so many years, during which time interest rates may change and your personal circumstances vary quite markedly. Your ability to forecast future changes in your financial status, therefore, may help to prevent falling behind in your mortgage repayments if your situation changes the spectre of repossession and avoid the spectre of repossession.
The type of mortgage
The cost of borrowing – as determined by the Bank of England base rate – is, of course, currently at an all-time low. It is very difficult to know if, and when, this rate – and the cost of your mortgage along with it, is going to rise.
To help overcome some of this uncertainty, however, you might consider opting for a fixed rate mortgage – for, say, a period of five years – so that you have the comfort of knowing just how much you will be paying in each monthly instalment during that period (after which, your borrowing typically reverts to the lender’s standard variable rate of interest).
Mortgage protection insurance
Accidents, sickness or enforced redundancy – leading to an enforced absence from work and loss of your normal income – are all unforeseen events that could throw into disarray even the most carefully planned household budgets.
Mortgage protection insurance is fairly reasonably priced and might help you through such lean periods by paying a regular monthly benefit (typically for a maximum of one year) which covers all, or a proportion of your mortgage repayments until you are able to get back to work.
Whatever the reasons for your difficulties in meeting your mortgage commitments, one of the surest ways of beating off the prospect of repossession is simply to keep talking to your mortgage lender. They are committed to helping borrowers to every extent they are able – help can only be provided by them, though, if they are kept fully in the picture about the reasons for your particular financial circumstances at the time.