Sunday, 16 February 2014

Mortgages, homeowner loans and insurances that go with it

If the above topic did not get you already depressed, then allow me to elaborate further. As I said in a previous blog – which means that you should have read all the previous blogs as well, but I do not mind you skipping – lenders of such loans will require that you take out insurances that can cover several eventualities, or rather which cover most of the common occurrences that may preclude you from repaying your loan as a good UK citizen should. To make it painfully clear, the insurances are non-negotiable components of the loan agreement, but you will most likely be allowed to try and find the most affordable provider of the insurance package the lender obliges you to purchase.

As you may already guessed – or read above – the package will most certainly include a life insurance, which would make the bank your primary beneficiary in case that you die. It is also possible that such an insurance package will also cover several debilitating and crippling injuries that will bar you from being gainfully employed, but also there might be an insurance that would cover the (temporary) loss of employment.

Most of other insurances will be pertaining to your home that you put up as collateral. It will include fire hazard, maybe also flood hazard, electricity damages, anything that can lead to the collateral losing its value should, or rather may be covered. Such packages are standardised by now and all you need to say is that you are required to take such an insurance package for mortgage purposes and the agent will know which packages do apply. Feel free to shop around for the best offer.

Sunday, 9 February 2014

What shall I do if I get into arrears with my homeowner loan repayments?

There is no such thing as a perfectly repaid loan. No matter how smooth your life is going, no matter how secure your employment is, no matter how healthy you are and were during the whole duration of the loan, somewhere, sometime, something will happen and you will get into some kind of trouble. Very often the trouble will be manageable and you will organise the payments to be as good as on time. There will be, there always is, the one time where all the precaution, all the good intentions and all the tricks fail. 

The first thing you should make sure of is that you do not panic. Panic leads to rash decisions and such decisions are never right. Additionally, panic may make you inert, which is probably the worst thing that you can do, i.e. say nothing to anybody, including the lender. Selling the house is always an option, but if you are into arrears, it should probably be your last tangible option; after all other avenues are gone and unavailable – which is almost never the case.

As I already mentioned, maybe you did not see it, the lender is not sitting with binoculars and keeping you under constant surveillance, just waiting that you get into trouble so that he or she can sell your house. For a lender, a bad mortgage is the last thing he or she wants to be involved in. Their business is lending, not real estate sales. Every successfully repaid mortgage adds to their credibility, market value, good name, positive rating, etc. and for that very reason the lender will be rather inclined to help you when you get into trouble, instead of forcing your hand to grasp for drastic measures.

First of all, you need to immediately when you learn of your predicament evaluate the situation that you are in and how you can remedy it, particularly when you will be able to restart the monthly payment plan. You need to have exact projections in terms of what you are going to do, how you are going to do it and also be able to verify it in some manner. Then you need to make an appointment with your lender and state your case, asking either for a grace period, or for any other solution that seems viable, like for instance, lowering the monthly payment for a couple of months to an acceptable level and adding that reduced amount to all the other monthly instalments after the crisis has passed.

You will be surprised how forthcoming lenders can be, particularly if they have insight into your accounting, or rather if you are their customer in other financial dealings as well, such as having your personal account there, getting your wages there, and such. They will value your incentive that you approached them before serious damage has been done and you accumulated missed payments so that legal procedures have been already put in motion. Once legal proceedings are instigated, there is not much you can do, or rather a grace period will be out of the question. It is imperative that you act swiftly and with a clear mind, because it is your home we are talking about.