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Many mortgage holders are finding they are struggling financially at the moment and with the dire state the housing market is in at present, new problems are rearing their heads that many homeowners will not have previously thought of.

With falling house prices over the last couple of years and more falls in the future, it is certain that there are a large number of mortgage holders 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 people 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 need of selling your house and it is under the original buying price, then you could be in real problems as you might find the mortgage isn’t covered by the sales price. In this case, you really should speak to a good local financial advisor as soon as you can to investigate what options could be open to you.

But back now to those mortgage holders that are not planning to sell their homes and are happy to sit and wait for the housing market to recover. Here we can also include those that are having to sell, but know that the house price is still covering the mortgage and realize that with the price of their next house also falling, the bridge between the two houses 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 may 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 incompetent, greedy lenders were happy to lend 125% of the property value. This is not the case any more and many lenders 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 new mortgage now has to be for almost 85% of the house’s value, even though you are not borrowing a penny more.

This difference is purely because the price of your property has fallen, nothing else. But if you borrowed 90% or more, then you could now be looking at an impossible 100% remortgage at best. Many building societies will now not touch you, even though they were probably clamouring for your business when you first bought your home.

What can you do? Well seeking good qualified professional advice from a financial advisor is a must. Get him to help you compare mortgage rates for those mortgage products that are open to you given your finances – get him just to show you the best rates that apply to your circumstances. If you find out how to compare remortgage rates and none are affordable, then ask for other options from him. Extending the mortgage loan can be costly in the long term, but you may be able to move other finances around.

Whatever you decide to 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 on the market later, but if the search for a new mortgage takes too long, you could be out of time if you keep putting off the dreaded deed.

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Mark Schwartz

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