Would you be able to cope financially if your children fell ill
You have a well-paid job, the house you worked hard for, a healthy savings habit and you’re in a good place without a financial care in the world. But then your child develops a serious illness and you give up work to be by their side.
This is just one awful scenario amongst many that could lead to homeowners unexpectedly struggling to meet monthly mortgage repayments.
While maintaining finances in this situation may be the least of borrowers’ concerns, spending a little time upfront addressing the issue will save a lot of time in the long run.
If the unexpected happens, Yorkshire Building Society is encouraging homeowners to:
Review your finances
Get a handle on your outgoings and categorise your essentials such as mortgage or other loan repayments, household bills and food. Review any savings you have and set a new budget for household expenditure. Gather information on any benefits you may be entitled to.
Speak to your mortgage lender
The sooner the better – if you think you will struggle to meet your monthly mortgage repayments contact your lender straight away as this is likely to be your biggest regular expenditure. Lenders want to help but the communication needs to be two ways. Be honest about your situation and listen to the options and support they are able to offer.
Pay what you can, when you can, regularly
Lenders will outline available options specific to your mortgage terms and conditions and individual needs. This might be in the form of temporary payment holidays, reduced repayments or other solution. You should be realistic with what you can afford to pay based on your savings or benefits and if committing to a new repayment schedule, stick to it and let your lender know if you encounter any further repayment issues as soon as possible.
Depending on the situation you find yourself in there will be relevant support groups and organisations you can turn to for advice. Your lender will outline your options relating to your mortgage but you can also get free, impartial advice from Citizens Advice.
Charles Mungroo, Mortgage Manager at Yorkshire Building Society, said:
For most homeowners, the thought of not being able to meet their monthly repayments simply doesn’t cross their mind but it is important they know what to do if they find their circumstances change suddenly.
While borrowers may well have cover in place for themselves in case they become seriously ill or worse, this doesn’t always extend to loved ones. Accidents or poor health within borrowers’ families are often very distressing. Having conversations with mortgage providers early could prove crucial in the long run and take a weight off their mind.
Some homeowners facing difficulty repaying their mortgage at short notice can shy away from confronting the situation in fear of losing their home, but rest assured there are many solutions we can explore to ease the burden and allow them to keep the place they call home.
Almost £10m a day[i] is paid out in insurance claims to help families cope with unexpected financial difficulties, so while borrowers who plan ahead are likely to be in a better position when it comes to helping cover mortgage repayments, that too comes with a warning.
Traditionally homeowners purchase protection insurance such as life insurance at the same time as taking out their mortgage, but it’s important these policies are then regularly reviewed to make sure they meet the changing needs of homeowners and their families.
Life events such as moving up the property ladder or starting or expanding a family can all lead to policies being insufficient to meet current needs. Everyone hopes they will never need to use insurance, but if people are already covered or do decide to take it out, it’s important they make sure they have the right cover at the right time of their life, should they ever need to call upon it.
[i] ABI Protection Claims, 2015