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Can’t afford a mortgage

If you can’t afford a mortgage – you’ll find the right advice here.

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By Pete Mugleston   Mortgage Advisor

Last updated: 5th April 2019 *

I cannot afford my mortgage - What are my options?

We regularly receive questions from customers who cannot afford a mortgage and need advice. These queries don’t just come from first-time buyers or homeowners who are struggling to keep up with or can’t afford mortgage repayments, they also come from those who can’t afford a mortgage anymore full stop.

Whatever your circumstances, we’re here to help and advise.

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Help! I can’t afford my mortgage. What can I do?

Life is unpredictable, and has a habit of throwing obstacles in our paths which can drastically alter our financial situation. If you’re an existing homeowner, you may find that such incidents result in you defaulting on your mortgage payments for a month or so, or you could find yourself in a situation where you simply cannot afford a mortgage anymore.

The good news is that there could be a number of options available for somebody in your exact situation, including government schemes, specialist mortgage products and bespoke advice from the expert mortgage brokers we work with.

First of all, talk to your lender

Customers often approach us with questions like “I can afford my mortgage this month. What can I do?” and we always tell them to contact their lender first and foremost. There may be other options available if this is going to be a long-term issue, but in the short term, your lender might agree to…

  • Extend the mortgage term without remortgaging: This will reduce your monthly payments by spreading the cost over a longer period.
  • Grant a payment holiday: This might give you time to get back on your feet financially, but can have an impact on your credit rating.
  • Offer to defer the payment

What options are available when you can’t afford mortgage payments?

So, what happens if you can’t afford your mortgage? If you’re a homeowner in this position, don’t panic - there are options out there that could help, including...

  • Remortgaging
  • Switching to interest only
  • Product transfers
  • Equity release
  • Government schemes

Remortgaging

Remortgaging involves refinancing your mortgage in order to obtain either a better rate or better terms, particularly if you can’t afford the repayments. If you are currently on a lender’s variable rate then you’re likely to get better rates after remortgaging (at least in the short term) meaning the payments will be lower and hopefully more affordable.

Remortgaging can also allow you to change the term of the mortgage to lower your payments and make it more affordable. Subject to age/income/credit you could reduce your monthly payments by spreading the cost over a longer period.

Remortgaging to consolidate debt

Although you might be feeling the pinch from the mortgage payments it can be other debts that are causing some financial pain so it might be applicable to add some other debts to your remortgage to lower the overall monthly outgoings

Bear in mind though, if you’re still tied into an initial deal you might have to pay an early repayment charge as well as the other fees associated with remortgaging.

Moreover, securing additional debt against your home is a major financial decision and it should not be done lightly. Make sure you speak to an expert advisor for guidance before proceeding with this course of action.

Second charge mortgages

If you are tied in with your current lender or don’t want to lose your favourable rate with them but need to clear up debts to improve your financial position you could look at a second charge mortgage as a means of raising additional funds.

There are lots of options around remortgaging and if it is the right thing for you to do, make an enquiry today and speak to one of our experts to guide you through the process.

Switch to interest only

Assuming you’re on a capital repayment mortgage, switching to an interest only agreement with the same lender or a new lender might be an option.

With an interest only mortgage, the borrower only pays off the interest each month and the loan itself is due in full at the end of the term. This can mean significantly lower monthly payments, but you will need to evidence a viable repayment vehicle in advance to settle the outstanding debt upon the agreement’s conclusion.

Product transfer

On a similar note, you may consider a product transfer. Supposing you’ve been moved to your lender’s Standard Variable Rate (SVR) and the interest rate has risen, resulting in you being unable to afford your mortgage repayments. Assuming you want to keep your loan amount the same, you may be able to move to a fixed rate mortgage with your current lender. This is known as a product transfer.

The main advantages of a product transfer over a remortgage is that you are unlikely to be subject to a full valuation and there doesn’t tend to be any legal processes involved, meaning it can be less costly for borrowers.

Product transfer rates tend to be higher than those offered to new customers, if you speak to one of our experts than can search the entire market to get you the best deal.

Aged 55 or over? Consider equity release

Equity release, also known as a lifetime mortgage, allows borrowers over 55 to release cash from their  property without leaving their home, meaning no moving expenses. Typically there are no monthly repayments (or you can choose to repay a more affordable fixed rate). The outstanding balance will then be repaid after the sale of the property either when you pass away or move into residential care.

Government schemes

There are several government schemes that could help you out if you’re unable to pay your mortgage. In England, there’s Support for Mortgage Interest (SMI), which had its status changed from a benefit to a repayable loan in April 2018.

SMI can only help you out with the interest you’re paying on top of your mortgage repayments, not the repayments themselves. It is repayable when you sell the property or transfer its ownership to somebody else.

You will need to be in receipt of benefits or qualify for benefits to receive an SMI loan. You can read more about the scheme on the government’s website.

The Scottish and Welsh governments run their own versions of SMI. Make an enquiry to speak with an advisor for more information.

What if I’m getting divorced and can’t afford my mortgage?

If you’re getting divorced your name is on the mortgage you will be expected to keep up with your payments, even if you’ve moved out of the property.

Should either you or your partner stop paying a joint mortgage, this can damage both of your credit ratings as you each agreed to be liable for the debt when you signed up for the loan. If you can’t afford your share, possible options include…

  • Transferring the mortgage into your partner’s sole name (which might not be ideal if you were planning to continue living in the property). Contact your lender about this, although they are under no obligation to grant the request.
  • Remortgage, if you’re planning to remain in the property.
  • Take out a product transfer
  • Ask your lender if you can switch to interest only
  • See the opening sections of this article for other potential options

There is no specific help from either the government or mortgage lenders for divorcees who are unable to keep up with their mortgage payments, but make an enquiry and the advisors we work with will lay out all of your options.

What if I can’t afford a mortgage on maternity leave?

Many of the same options discussed in the sections above will be available if you cannot afford to make mortgage repayments due to a dip in income while on maternity leave, but first you should contact your lender to bring them up to speed.

Some lenders may consider offering you a payment holiday or adjusting the term length under these circumstances, but there may be other options available. Make an enquiry to speak with an expert advisor for more information.

What if I can’t afford a mortgage after the death of my partner?

If you’re in a joint mortgage and your partner passes away, the debt will not automatically be transferred into your sole name, regardless of any will that’s in place. This is something you will need to apply for and the lender will only agree to the transfer if you can prove you’re able to afford the mortgage on your own.

Some borrowers fall back on savings or life insurance policies in this situation, but if that is not an option, consult the opening sections of this article for possible alternatives or make an enquiry to speak to a specialist advisor.

What if I can’t afford my second mortgage?

Many of the options we have discussed throughout this article will apply to homeowners who are struggling to pay a mortgage on a second home. Consult the opening sections for potential courses of action.

Moreover, some borrowers in this situation have remortgaged their home onto a buy to let agreement and used rental income to pay off the mortgage. You can read more about BTL mortgages on our dedicated hub page.

What if I can’t afford a mortgage full stop?

We often hear from customers who think they can’t afford to get onto the property ladder, but they’re not always right about that. There are a range of products and schemes which can help borrowers whose affordability is tight, including…

These are merely a few of the options that might be available if you think you might be turned down for a mortgage on affordability grounds. Make an enquiry to speak with an expert advisor and find out what other alternatives might be on offer.

Speak to a mortgage affordability expert today

If you have questions about mortgage affordability and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 5th April 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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