Worried about remortgaging? Don’t panic

The last few years have been a torrid time for homeowners. The news is full of stories about high interest rates, mortgage deals that appear and vanish in weeks and warnings of a volatile year ahead.

I’ve been filming a series of free mortgage video guides with MPowered over the last week and it’s clear from my guest experts’ comments that affordability is the big concern for most people on the housing ladder.

If you are worried about what will happen when your current mortgage deal ends, don’t panic. There are options even if you are struggling. But don’t delay!

​Don’t wait until your existing mortgage deal comes to an end before you ask your lender about the options available (Picture: stock.adobe.com)

Short-term problems

If you’re worried about getting through the next few months, then explain to your lender that you are experiencing short-term financial difficulties. You may qualify for a mortgage payment holiday. This is a short period where you are given a break from your regular payment, though interest will continue to apply and the missed payments get tagged on the end of the mortgage.

Though mortgage holidays are common, it’s important to ask if this will affect your credit score. Ask the lender to confirm in writing that they aren’t listing the holiday as a ‘default’ on your credit file.

Longer-term affordability

Don’t wait until your existing deal comes to an end before you ask your lender about the options available. The mortgage provider will need to understand more about your financial situation, so take some time to write down what the next few years might hold in terms of your job and any significant life changes that might be on the horizon.

Interest-only mortgages

An interest-only mortgage does exactly what it says on the tin. You only pay the interest on the mortgage but not the cost of the property itself. The obvious problem here is you don’t end up owning the property unless you have an alternative way of paying off the debt. A lender will usually want to know how you intend to buy the house too.

Extending your term

Extending the term of your mortgage may be an option with some lenders. Your payments will reduce, but the amount of interest you pay will ultimately be higher. You may also face challenges if the new term takes you past what your lender thinks your retirement age will be.

Offset mortgages

If you have some savings, then an off-set mortgage might be a good option. These are a little tricky to explain, but think of this as a way to ‘link’ your savings with your mortgage to reduce your interest. Say you owe £300,000 and you have £40,000 in savings. The lender agrees to reduce the amount you owe interest on to £260,000 as long as you keep that £40,000 untouched.

If you are in arrears

Okay, let’s tackle the options if things are a bit trickier. Your lender may consider the option of ‘capitalising the arrears’. This means they agree to add your arrears to the amount you owe on your mortgage. Inevitably, payments will increase when this happens, so this may only be possible with an extended term.

Other alternatives

Many of my mates are taking in lodgers to help them pay the bills. There are a range of websites where you can find people who want regular accommodation a few days of the week. I’d take some advice on your rights if things don’t work out though.

If you have a desirable or unusual property, you could hire it out to film and television studios or advertising companies for a few days. There are agencies specifically for this too.

In the worst case scenario, you could always downsize. This means selling your property and moving to a cheaper one. This isn’t an easy decision, but it does mean you get the benefits of any capital in your home. You could even choose to rent for a bit until the mortgage market has become more affordable.

No matter what, it’s vital you take realistic, professional advice and understand all the options and implications before continuing.

Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist. Visit martynjamesexpert.co.uk