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Arrears are part of a debt that is overdue after one has not made one or more payments as required. It is the amount of money accumulated from when the first missed payment was due. People fall into arrears for several reasons, which are usually beyond the borrowers’ control.
See the reasons that lead to falling into arrears and how to avoid them in this article. You can access the article How Many Months Mortgage Arrears Before Repossession to learn more:
- Sickness
It is possible for one to fall ill, which may be severe, that they might also take quite a long time to recover. It directly affects the borrower in that they spend a lot of money for treatment and medication to the extent that they struggle to pay their mortgages.
- Financial Constraints
These are issues that come up which a borrower may not be able to control, like when there is a rise in the cost of living. It means that one gets to spend more to meet some basic needs and, in the process, they begin to strain in the payment of the mortgage.
- Diversion Of Funds
Most people obtain mortgages after ensuring that they will be able to pay and come up with a plan for the payment. They then commit a certain amount every month to go into the payment of the mortgage. Emergencies occur in the process, and one has to find a way of addressing them. One of these ways is diverting funds to sort out the emergency.
- Unemployment
For one reason or another, a person may get unemployed. It directly affects this person’s financial commitments, including payment of the mortgage, because they do not have an income.
- Increased Interest Rates
Whether or not borrowers are informed well in advance about an increase in the interest rates still affects mortgage payments. It’s because the borrower will have to commit more funds to pay mortgages, something they may not have anticipated.
Ways To Avoid Mortgage Arrears
You can avoid falling into mortgage arrears in the following ways:
1. Take The Alternative Of Interest Only
It is a short–term way out in case you are troubled that arrears will catch up with you. This alternative means that you do not make repayments but instead pay interest only. Even though the lenders are not compelled to allow you to take the alternative of interest – only, it is an option that will reduce your bill into a great deal.
2. Get Insurance Cover
It is advisable to obtain medical insurance if you can afford it. In case of an accident or severe sickness, the insurance will take care of the cost. It, in turn, will help you manage your mortgage well, among other financial commitments that you may have.
3. Reach Out To Your Lender
When you are worried about falling into arrears, your lender is in a position to help you by discussing with you the various options you can take. You can also suggest ways you think can help you keep off arrears, then see if the lender can approve them. You could opt to be paying higher amounts than the required to cover you when you are not able to pay. The lender could advise you to prolong the term of your mortgage, take a payment holiday, or postpone the interest.
4. Embark On Saving
Take advantage of the affordable rate you are on currently, and save as much as possible. Make use of this opportunity when you have an affordable rate and pay off a certain percentage of your mortgage, even over 50 percent. It may land you a cheaper rate and help you be comfortable operating on a strict budget.
5. Find Out If You Can Get Help For Mortgage Payments
You can access the benefits calculator from GOV.UK website to see what you can be allowed to have. It is possible to qualify for some benefits or get government assistance to pay for your mortgage. It, however, depends largely on the circumstances you may be in that may cause strain or inability in payment of your mortgage.
Conclusion
Getting into mortgage arrears is real; however, with the ways discussed above, you can get to avoid them. As much as you may not be 100 percent certain that you are ready for a mortgage, do your best to get your finances in order first, then get a mortgage rate that you can comfortably manage.
