Plenty of mortgage holders are deciding they are struggling financially at the moment and with the crumpling state the housing market is in at present, new problems are rearing their heads that many people will not have previously worried about.
With tumbling house prices over the last couple of years and more falls expected, it is certain that there are a large number of home owners on the market for whom their house price is worth far less now than when the bought it a year or two ago. If you are one of these mortgage holders and are not intending on selling your property, then you might think you are not affected, but how wrong can you be?
If you are in the position of needing to sell your property and it is below the original buying price, then you could be in real difficulties as you might find the mortgage isn’t covered by the sales price. In this case, you really need to speak to a good local financial advisor as soon as you can to find out what options could be open to you.
But back now to those people that are not planning to sell their properties and are happy to sit and wait for the housing market to recover. Here we can also include those that are wanting to sell, but know that the house price is still covering the mortgage and allow for the fact that that with the price of their next house also falling, the bridge between the two properties is less.
What is the problem for these mortgage holders? Well many people who bought a house at the peak of the property prices will have bought them with fixed mortgages. If you secured a 5-year mortgage, then you are likely have a few more years before you need to worry. But if you secured a very low rate with, as goes along with the best rates, a short fixed term, you might be in need of a new mortgage very soon.
Two years ago, some building societies were happy to lend 125% of the home value. This is not the case any more and many building societies are punishing those borrowing more than 75% with higher interest rates. Even if you only borrowed 75% of the home ’s value when you bought it at its peak price, if it has lost 10% of the value so far, then your remortgage now has to be for almost 85% of the property’s value, even though you are not borrowing a penny extra.
This difference is purely because the price of your house has fallen, nothing else. But if you borrowed 90% or more, then you could now be looking at an impossible 100% mortgage at best. Many building societies will now not touch you, even though they were probably clamouring for your business when you first bought your house.
What can you do? Well seeking good professional advice from a financial advisor is necessary. Get him to help you compare mortgage rates for those products that are open to you – get him just to show you the best rate that apply to your circumstances. If you compare all remortgage rates and none are affordable, then ask for alternative options from him. Extending the loan can be costly in the long term, but you may be able to move other finances around.
Whatever you do, it is always worth starting to look early, rather than leaving it to the last minute. You can always swap to a better deal later, but if the search takes too long, you could be out of time if you keep putting off the dreaded deed.
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