Face up to mortgage troubles

Take steps to clear your mind of mortgage repayment worries.
Take steps to clear your mind of mortgage repayment worries.

Do you shove letters from your mortgage lender to one side to ‘open later’? Or ‘file’ them in the bin? Or flick to another TV channel when news presenters start discussing the possibility of interest rates and costs for borrowers rising?

If your answers are yes, you are far from being alone.

The financial ombudsman, which resolves disputes between consumers and financial firms, has raised concerns about the level of mortgage borrowers in “debt denial”, borrowers who bury their heads in the sand, leave it too late to get help or support from their lenders, then turn to the ombudsman as a last resort.

In fact, last year, 13,659 people, the highest number ever recorded by the Financial Ombudsman Service (FOS), contacted it for help with a mortgage problem.

And though around one third of mortgage complaints are upheld in consumers’ favour, the ombudsman service is concerned about the increasing numbers of people letting the situation get out of hand before they seek help. They also expect “unrealistic” solutions - for example, asking for payments or interest to be suspended indefinitely, or for debt to simply be written off.

The FOS accepts that, for many, admitting they are facing significant financial problems is hard, or they may be worried about the impact of telling their lender about their situation.

But it insists it is always best to speak out before you miss a mortgage payment, rather than waiting for the situation to go wrong.

Andrew Montlake, director of broker Coreco, says: “There is no embarrassment in asking for help and talking through options with your broker and/or lender before it is too late.

“Lenders do have a duty of care to deal with issues sensitively and there are a few tools that lenders can use to help head off a damaging situation.”

It’s important to see your mortgage payments as a priority. While credit cards may come with a higher rate of interest than your mortgage, if you don’t pay your mortgage debt you could face losing your home.

If you can’t meet your full mortgage repayments, at least paying whatever you can afford will show you’re actively trying to do something rather than just attempting to brush the whole situation under the carpet.

Try to maintain a good relationship with your lender, but if you do decide to make a formal complaint about them, don’t stop making your mortgage payments just because you’re in dispute as this can make a bad situation worse.

If you can’t realistically afford your monthly payments, it may be worth considering downsizing. This won’t be an easy decision, but finding a home you can afford is better than losing one completely because you can’t keep up your payments.

The ombudsman also says people should bear in mind that from a lender’s perspective, repossessing someone’s home is a “last resort” and the process is a costly one for those involved. It expects lenders to play their part and come up with creative solutions to help people to stay in their homes.

HOW... CAN YOU DO YOUR HOMEWORK WHEN TAKING ON A BUY-TO-LET INVESTMENT?

More than nine in 10 (93%) of buy-to-let property investors have no plan in place for their investment over the next five years, according to research from specialist buy-to-let business Platinum Property Partners.

The survey, conducted among more than 500 UK buy-to-let investors, found that half have no written business plan, yet the most common reason given for someone having a buy-to-let property was to help them secure a decent retirement income.

Here are some tips for investors from Platinum:

1. Set financial goals. Work out what you hope to gain from your buy-to-let portfolio. This could be capital growth, long-term income to supplement retirement income or to provide a substitute income now.

2. Factor in voids and bad debt. There will be periods when the property is empty and not generating rental income. These are known as void periods and the National Landlords Association (NLA) recommends that buy-to-let investors budget for at least two months a year when the property is empty — or when tenants fail to pay their rent.

3. Regular evaluation. Regular assessment of income and costs will enable you to calculate your return on investment and gross annual profit. It will also show how fluctuations in rent charged, fees payable and mortgage interest rates can affect these figures and whether you need to change any plans.