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How To Survive The Financial Drought

May 19, 2008
Mortgage brokers are the best way of quickly finding the best deal and this is becoming increasingly important in this time of financial difficulties. Banks have been through a time of refusing mortgages to the majority, particularly those without large deposits and home loans have been increasingly difficult to come by. A change is occurring at the moment with banks now offering new borrowers better deals but, unfortunately, at the expense of current customers who have felt the weight of sudden interest hikes.

When discussing finances with your mortgage broker, make sure you know the ins and outs of the finer details for that rainy day. When the unexpected financial pressures come along, you will need a contingency plan, especially if you have no significant savings.

For those who believe their financial setback to be temporary, you mortgage broker will hopefully have secured you a deal that means you can take full benefit of a payment holiday. The conditions will vary from lender to lender and it is essential you know what they are before you commit yourself.

Some lenders require that you make overpayments during the more secure times to take advantage of a mortgage payment holiday. The amount of the overpayments will equal the amount you can take a holiday from paying. This is, of course, for those who have had their loan for longer and have had chance to pay some off in advance.

For other more fortunate borrowers, a payment holiday is possible as long as you have had the mortgage for three months or more. This period will stretch between three and twelve months depending on personal circumstances and can bring welcome relief, possibly giving you time to get back on your feet to ride out the current credit storm.

These mortgage payment holidays are available one or two times through the life of your mortgage and can bring serious welcome relief. I experienced this on a personal level when I was going through a divorce. Unable to afford the mortgage payments after my husband left, and without an amicable arrangement with the ex, I had to find a way of keeping the house until I was able to sell it.

My mortgage broker advised me to take a payment holiday which was agreed for six months. I kept up the insurance payments and the house was put on the market with a sale completed days before the mortgage payments were due to kick in again. Needless to say, this worked out well for me as I didn't lose money on a repossession which is what I would have otherwise faced.

For those without this option, or who do not wish to use it yet, can take advantage of offset mortgages. These mortgages set the amount of your savings against the balance of your mortgage effectively cutting the size of your overall mortgage. However, they can be adjusted in order to bring lower repayments for a set period to bring you a bit of a breather.

For those who have a stable credit rating and want to take effective measures before facing financial difficulties, it is a good idea to borrow more than needed initially as rates are good for those new to mortgages. This spare equity can then be put in a high interest account, earning you money and being in place for that difficult period, should it ever come.

If your mortgage broker arranged a repayment mortgage for you then the amount you are paying can be reduced by switching to an interest only mortgage. This is best looked at as a short term measure to relieve difficulties and adequate investment taken out to repay the outstanding amount at the end of the term if you wish to continue on this road.

One measure that not that many people consider when wanting to ease the financial burden temporarily is that of switching your borrowing to a currency that has a lower interest rate. This can drastically cut the cost of your mortgage but comes with risks that should be carefully weighed up by your mortgage broker first.

At the end of the day, the trick is to not be panicked into action by news reports of impending financial doom, after all, good news never sold newspapers.
About the Author
Financial expert Catherine Harvey looks at the way a mortgage broker could help with financial difficulties.
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