Practical steps to avoid losing the family house
HERE are some options, from a guide written by mortgage adviser Karl Deeter, for avoiding repossession of the family home.
- Term adjustment
If you hare having problems repaying your loan, talk to your lender and see if they will extend the term. Increasing the term means that you will pay less each month (although more interest over the lifetime of the loan).
There may be restrictions on the extension based on your age.
- Interest only
An interest-only loan is a loan where the capital is not paid down, only the interest is served.
For example, if you owed €250,000 over 25 years at a rate of 4pc, a repayment mortgage would cost about €1,300 per month before mortgage interest relief.
However, with an interest-only mortgage it would be €833 before mortgage tax relief but at the end of 25 years you would still owe the full €250,000.
For this reason, interest-only mortgages are not considered a good idea on a family home unless you have reason to do so.
- Payment freeze
This is where you literally don't pay anything for a certain amount of time. However, this means more interest, which can quickly add thousands to the total cost of credit over the lifetime of your mortgage.
Sometimes you will be able to refinance with another lender, but if you are doing this because of missed payments it may mean your only option is a specialist/sub-prime lender who will actually charge a higher rate of interest.
- Loan modification
Sometimes a lender will let you make several modifications, such as moving to a different rate, so that you can service the debt more effectively.