What happens when a mortgage goes bad? What are the consequences and why it can damage your financial standings permenantly if not taken heed.
Under different circumstances here are some of petty solutions you can save your mortgage from going bad to worse :
1) Mortgage places a serious strain on your outgoing income. If you find more then 85% of your outgoings are strictly set aside for your mortgage then you are a victim to a stretched income. If you took your mortgage out at an attractive rate, you may have come to the end of your deal, thus putting you in liability for a higher repayment amount with any elevated rises in the mortgage interest rate. When taking out a mortgage, you should always bare in mind changes of circumstance aswell as how much you have remaining a month for other essential items.
2) Rising interest rates rise throw your income unmercifully out the window If you struggled to cope with your mortgage repayments. This is the time then to remortgage or to view other options. Pushing your income to its limits when you first apply for a mortgage is a bad idea, as after 2-3 years your rates can rise, your deal could come to an end, aswell as the Bank of england interest rate rises.
3) Unforseen circumstances can leave you in a crippling state of mind If you are not covered by payment protection insurance or any other form of repayment protection, then you may be bearing the brunt of the bore, unforseen circumstances can include injury by accident, illness or unemployment.
So that gift wrapped mortgage at 5% may have changed significantly since you first took it out, and as many people still do, you should always look at what you can afford on a mortgage in a realistic fashion. That extra lump of interest on your mortgage could make the difference between a good reliable payer to someone in arrears mounting up bad credit.
It is vital to read any small print before proceeding with any form of mortgage application. There may be hidden interest charges and penalties to compensate a lower interest rate, so that 5.29% rate you saw in the high street window may be laced with charges exceeding £2000 – £5000 which is compensating for a slightly higher rate in order to look more attractive.
Good mortgages can turn bad, prepare yourself and save for rainy days and your mortgage can stay in your good books, rather then arrears.