I bought a house for the first time last year, not long before I turned 40. On the one hand it has made me feel far more secure than I ever have before, but with that has come a new sense of responsibility, and the knowledge that unless I manage my finances and my lifestyle carefully, there is always the risk of repossession.
It might sound dramatic, but I sometimes It can be easier than you think to find yourself in trouble, especially when you are self-employed like me. It only takes one thing to go wrong – an accident that prevents you from working maybe – and you can find yourself on a slippery financial slope.
If you ever should get to the stage where you think your home might be at risk of repossession, there are plenty of organisations who can help. Citizens Advice can offer advice on debt and if it’s appropriate for your circumstances, you might want to consider a a bridging or repossession loan from a company such as TIC Finance. Shelter can also offer specific advice about house repossession, including information about applying to a court for a court order to be changed.
They say though that prevention is better than a cure, so here are a few ideas for ways to avoid the risk of repossession in the first place.
Don’t borrow more than you can afford to pay back
This might sound obvious, but it can be tempting when given a figure that in you could in theory afford to borrow, to look to spend all of it. It’s like when you were a child – do you remember that feeling of being in the toy shop and having your pocket money burning a hole in your pocket, desperate to spend it all?
Just because you could borrow a particular amount of money though, doesn’t mean that you have to. Do you really need a spare bedroom or that double garage? Might it not be nicer to have a slightly smaller garden but to reduce your monthly mortgage payments and not always be worrying about how long your next month’s pay is going to last?
(Small gardens really CAN be pretty.)
Take out insurance
When I knew I was going to be responsible for a mortgage, I took out income protection insurance. It’s an affordable monthly premium and although it wouldn’t 100% replace my income if I was too ill to work, it would pay out enough to cover the mortgage, bills and essentials. This policy suits me as I’m self-employed, but when I was researching it I discovered all sorts of insurance options that I didn’t even know where available, like redundancy and unemployment insurance.
These types of insurance are ideal if you don’t have much in the way of savings and know that without a regular income you would have trouble meeting mortgage repayments.
Choose the best mortgage for you
Many mortgages offer the option to take a repayment holiday, which could be all you need if you are having a difficult couple of months and need a bit of breathing space. Making early repayments is another way to bring down overall debt more quickly and reduce the risk of repossession.
Build up a buffer
Try to build up savings that you can use to cover mortgage repayments in an emergency. Even if it might be tempting when you’re feeling flush to splash out on a holiday or a new car, putting at least some of that money into savings instead makes much more sense in the long term and you will thank your younger self should you ever find yourself in trouble.
The best way to save effectively is to make savings a priority, rather than trying to save what’s ‘left over’ at the end of the month. (There very rarely is anything REALLY left over is there?) Instead set up a standing order to a savings account that leaves your account as soon as you get paid and you’re much more likely to stick to a savings plan.
Keep in touch
If you should find yourself struggling to make repayments, the important thing, as with any kind of debt, is NOT to bury your head in the sand. Ignoring the problem and hoping it will go away is the very worst thing you can do.
Lenders will always want to help if they can, and will appreciate regular and honest communication. If you are open about your difficulties from the start you may be able to negotiate lower payments for a while, or put a plan in place to make your situation more manageable.
Hopefully with these tips you can avoid the risk of repossession entirely and enjoy your happily ever after in your own home.
In association with TIC Finance