How To Avoid Defaulting On Mortgages

by | Friday 14th Apr 2023 | Mortgage News

Avoid risk of defaulting on mortgages

Avoid risk of defaulting on mortgages (Source: Experian)

2023 has turned out to be very tough year for the average UK resident. With spiralling interest rates and the general cost of living going to unprecedented levels, people are struggling to keep up with their bills and many are defaulting on mortgages, credit cards, and other personal loans unfortunately. So what can be done if you think there might be a possibility that you could struggle to keep up with your current mortgage payments? The key is to tackle the issue before it becomes and issue and stop any potential mortgage struggles in their tracks, before things get worse.

What Is a Mortgage Default and When Do You Become ‘In Default’?

What does it mean when you are defaulting on mortgage payments? A default on mortgage payments essentially occurs when someone does not pay or cannot pay their monthly agreed mortgage amount on time. It will normally start as a missed payment and will show as such on your credit file. If there was a mistake made on your part and you make the payment late, it will show as a late payment. As long as you continue to keep up with the rest of your payments on time in the future, this should come off of your credit file fairly quickly. When is a mortgage considered in default? This normally happens when you do not make the payment at all and it goes from a late payment to a missed payment and you have more than one in a row.

Defaulting On Mortgage Payments

Getting a mortgage is perhaps one of the biggest if not THE biggest financial commitment anyone will go through. You intentionally put yourself hundreds of thousands, even millions of pounds worth of debt under the trust and assumption that you will pay the lender back the money over a period of time. but what happens if your financial situation changes and you can no longer afford your agreed mortgage payments? What if you lose your job or have to take a pay cut? What if your everyday living expenses become too expensive and you no longer have enough money leftover per month to pay your mortgage?

Being unprepared for rising costs can be a major issue when it comes to mortgages as defaulting on your mortgage payments should be avoided at all costs. A default of any kind can have a very negative impact on your credit file, and defaulting on a large mortgage loan can severely impact your future borrowing potential. That’s why, if you think that you might be struggling with your current mortgage payments, you should always contact a qualified mortgage advisor to discuss your options.

Speak To A Mortgage Advisor About Restructuring Your Mortgage

The first port of call if you are struggling or think you might struggle with your mortgage payments is to speak with a qualified professional mortgage advisor like Oportfolio. Your advisor will be able to sit down with you and go through your concerns. They will look closely at your current mortgage deal, the terms you have agreed to, your current financial situation, and will find out what can be done. If possible, your advisor will look at actually re-structuring your current deal, switching your mortgage product and rate or completely changing your mortgage lender to try and make things more manageable for you.

A better, more competitive rate and lender can help to significantly reduce your monthly mortgage payments and could make things much more manageable. However, this is not always possible for everyone, so in this case your advisor will look at some other options to help you manage your current credit commitments. Expensive monthly subscriptions, loans, credit cards, and other bills can impact your ability to keep up with your mortgage payments. With the help of a qualified financial advisor, you could potentially reduce, remove, or restructure any existing costly credit commitments you already have. Freeing up more money to keep up with your mortgage.

What Happens If I Default On My Mortgage?

So with all that in mind, why should you be cautious about potentially missing mortgage payments? In the end, what happens if you default on a mortgage? UK mortgage lenders are quite clear on what will happen if you default. If you miss a payment and do not pay it at all, this will constitute defaulting on a mortgage. If you continuously miss payments, the severity of the default will increase and the more it will impact your credit file. In the final and worst case scenario, consequences of defaulting on mortgage payments can lead to your property being repossessed by your bank.

Defaulting on a mortgage loan is something that every mortgage customer should avoid at all costs as it can seriously harm your credit file and your future mortgage borrowing potential. There are lots of other services that can offer default mortgage help, but where a mortgage advisor can help is before any issues happen. That is the key to remedy potentially defaulting on a mortgage loan.

Contact Oportfolio

The last thing that we want to see as financial advisors is anyone struggling to pay for the mortgage on the home that they have worked so hard to purchase. If you or anyone you know thinks that they might be struggling with their finances and might be at risk of defaulting on mortgages, feel free to give our team a call today. We are here to help.

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If you have any questions about UK mortgage news or or anything you’ve read then please get in touch. We’d love to hear from you.

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