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Can my ill health stop my house from being repossessed?
Ill health won't completely protect you from being repossessed, but there are lots of measure that you can take to avoid repossession, such as SMI, or speaking to your lender and switching to an interest-only mortgage for an agreed period.
If you’re suffering with your health, the last thing that you need on your mind is a concern of homelessness. While suffering from ill health doesn’t leave you immune to repossession, there are factors that you should know about that could help your circumstances.
You can also be considered vulnerable if you have recently suffered an emotional or stressful time - if you’ve recently been a victim in a crime or lost someone close to you.
What do I do if I’m facing repossession?
If you know that you’re struggling to make your mortgage payments, it’s vital to deal with things as quickly as possible. While this is easier said than done if you’re able to speak to your mortgage lender and explain to them why you’re struggling to meet your payments they will try to come to an agreement with you. Lenders typically don’t want to evict you as it’s much easier for them to be flexible and get your monthly payments back on track.
You should try to find a balance with your lender to get payments started again. That could be agreeing to a more extended contract so you can reduce your monthly payments or just pay the interest until you’re in a position to make the full payments again.
If you’re not able to come to an agreement here, there are still options for you.
I need extra help, what can I do?
If you’re struggling with your health and it’s preventing you from working, if you’re not already you should look to see what benefits you’re entitled to. While these benefits might not cover your full mortgage and living costs, it’s a helping hand that could make a big difference, especially if you’re able to make a deal with your lender about reducing your payments.
Specific benefits will also qualify you for SMI, Support for Mortgage Interest. Being eligible for the SMI scheme means that the Government will help you and cover your interest payments. They will pay the interest on the first £200,000 of your mortgage from when you’re unable to. If you’re on Pension Credit, however, they only cover the first £100,000.
How do I qualify for SMI?
For SMI support, you will need to be receiving certain benefits, such as income support, income-based employment and support allowance, income-based jobseeker’s allowance, universal credit or pension credit.
This means that if you have recently lost your job due to ill health, you should sign on for as many benefits as you qualify for to get all the help you can. If you don’t receive these benefits, you won’t be able to claim SMI. An important thing to remember; if you’re claiming universal credit and no other benefit, to qualify for SMI you’ll need to have received universal credit and paid your mortgage for at least nine months.
How do I apply for SMI?
When you apply for your other income-related benefits, you will automatically be assessed to see if you’re eligible for SMI. There are a few exceptions that mean you may not qualify that you should keep in mind.
If you own more than one house or have over £16,000 in savings, you won’t be eligible for SMI. SMI will also stop as soon as your other benefits stop if you return to work.
What do I do if my lender doesn’t believe me?
Sometimes lenders may require evidence of your vulnerability before agreeing to any change in your mortgage payments. If you’re able to provide proof, it may make your life more comfortable. You can send them a few different things as proof, such as –
A doctor’s note that outlines any illness or disability that you’re suffering from
A letter outlining the benefits that you receive
Sending copies of these letters is enough to act as proof and should make your lender more sympathetic and flexible with your agreement.
I think I have mortgage insurance; can that help?
If you have Mortgage Payment Protection Insurance, also known as MPPI, then you should use it. It’s a short-term solution, but it will help you get back on your feet as it will cover your full mortgage payment each month, as opposed to just the interest that SMI covers. If you have MPPI, you should claim before you apply for any Government help.
I’m eligible for SMI but am struggling to pay the rest, what can I do?
As SMI will only pay the interest on your mortgage, you are expected to find the rest of the money yourself for your monthly payment. This can be difficult when funds are low. Luckily, you do have a few options. You can spend time assessing your budget and try to cut back on any unnecessary expenses, but sometimes that isn’t enough. You can investigate switching your mortgage to an interest-only mortgage for a while until your income has increased and you’re able to make your payments on your own.
How do I apply for an interest-only mortgage?
You’ll need to speak to your lender and see if this is something that they would agree to. If you go with a plan – for example, you want to apply for an interest-only mortgage for six months until you’ve recovered and can go back to work – they are more likely to approve the switch. These mortgages are ideal if you’re suffering from ill-health temporarily, and if you’re waiting for an operation. If you talk to your lender and explain your recovery time and what position you’ll be in after recovery, they will be more inclined to help you along the way.
Mortgage lenders are under no obligation to help you arrange your mortgage payments, and if you don’t take control, you may find yourself going through the repossession process. While lenders aren’t keen to repossess as it’s lots of work and hassle on their part, if you’re not doing what you can to resolve the issues then repossession may be their only way of getting the situation under control. By making sure that you’re on top of every letter that you receive regarding your mortgage, and that you’ve done everything in your power to manage the arrears that you’re in, your lender should see that you’re prepared to take responsibility and work with you to resolve the debt.
If you don’t, you run the risk of your lender going to court for a possession order. If this does happen to you, you are still able to get back on track. Make sure that you know the repossession process so you can be up to date every step of the way and not get caught out.
Sometimes, despite all your best efforts working with your lender, you cannot resolve your financial issues, and you aren’t able to make your full mortgage payment. If you have hit this point, it’s sometimes worth selling your house instead of going through repossession. Being repossessed will stay on your credit file for seven years and make it incredibly hard to get another mortgage or any other kind of finance. Selling your own house will often mean you get more from the sale, as lenders will usually take your house to an auction for a quick sale which won’t always get you the best price.
Taking things into your own hands could make a big difference and mean that you have enough money from your sale to pay off your debt and fund your life elsewhere, whether that be in a smaller house or by renting somewhere instead. If this is something that you think might be the right choice for you, then get in touch with us today. Here at We Buy Any House, we do everything we can to get you a quick and easy sale to get you into a better position. We also offer free quotes and consultations with our property advisors, so you can get all of the information you need straight away.
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