Managing your mortgage
Even if you're not struggling to pay your mortgage, you’ll want to make sure you stay in control of your payments and not run into trouble.
On this page we look at:
- how to plan your budget so that you can manage your mortgage
- how to deal with increases in your mortgage payments or a drop in your income
- how to get the best mortgage deal available
- what to do if you start to get into difficulties.
Remember that you can lose your home if you don’t keep up repayments on your mortgage.
Work out how much you’ve got coming in and how much you need to live on each month. Include amounts for food, clothing and other household expenses for you and your family. You’ll need to plan for regular bills such as gas, electricity, water and council tax. Make sure you’re claiming all the council tax discounts you are entitled to.
For more information about claiming discounts on your rates or getting rate relief in Northern Ireland, see Help with your rates.
When you plan your budget, try to list everything that you spend money on. Using a budget calculator can help. Keeping a spending diary can help you see where your money is going. Don’t forget occasional items like birthdays and things that you pay for once a year, like car tax and insurance. Planning ahead for Christmas and other religious festivals can also help.
You can use our online budgeting tool to help you calculate your budget.
It’s a good idea to check your budget regularly. If your circumstances change for the better, you need to make sure you’re getting the most out of any extra income. If things change for the worse, you’ll need to identify where you can make cutbacks so that you can still manage on less money.
For more information about making the most of your income or making cutbacks, see Budgeting.
Second mortgages and secured loans
Think very carefully before taking out a second mortgage or secured loan to help you make ends meet or bring in extra cash. A secured loan uses your property as security in case you can’t meet the repayments. You should review your budget first to make sure you can afford it. If you don’t keep up the repayments on a second mortgage or a secured loan, you could lose your home.
If you're struggling to pay back loans, you should get advice before taking out a second mortgage or secure loan. See Help with debt, or contact your local Citizens Advice bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.
It’s a good idea to check every now and then that you are getting the best deal on your mortgage. If you signed up to a special mortgage deal for a fixed period, remember to check if there’s a better deal available a few months before it ends. You need to make sure you don’t pay more than you have to or you could end up struggling to meet the repayments.
Don’t just look for lower interest rates. You also need to think about the costs involved in switching to a new mortgage deal. Remember that a lender may make a charge for changing the type of mortgage you have or closing your mortgage account earlier than agreed. If you switch to another lender, your new lender may also make extra charges so make sure you check out all the costs before signing on the dotted line. You can get advice from an independent financial adviser.
If you’ve got a variable rate mortgage, remember that your repayments will go up if interest rates go up. If interest rates fall, not all lenders will drop their rates so ask your lender what they will do if this happens. If you’re not sure whether you have a variable rate mortgage, ask your lender or go to the Money Advice Service website at www.moneyadviceservice.org.uk.
If you’ve got a mortgage with a low starting rate for a fixed period, make sure you know when the fixed period ends and find out a few months before then what deal your lender will offer you. Find out what other deals are available and get financial advice if necessary.
You can use a mortgage calculator to work out how much your mortgage repayments will increase if interest rates go up. Go to the Money Advice Service website at www.moneyadviceservice.org.uk.
You can plan ahead for interest rate rises and a drop in your income by:
- taking out accident, sickness and unemployment insurance
- building interest rate rises into your budget. Using the mortgage calculator, enter interest rates that are 1% or 2% higher than they are now, to see whether you would still be able to afford your mortgage and live life the way you want to. Go to www.moneyadviceservice.org.uk.
- building up an emergency fund by putting some money into a savings account every week or month
- regularly reviewing your budget
- finding out what your employer provides if you become ill.
If you're already struggling to pay your mortgage or have got behind with your repayments, there are things you can do to get back on track and stop yourself falling further behind.
For more information, see How to sort out your mortgage problems.
For more information about increasing your income, or cutting down your expenses, see Budgeting.
The Money Advice Service is a free, independent service. Their website, www.moneyadviceservice.org.uk, has lots of useful information about managing your money, mortgages, insurance and other financial products.
Go to their website for more information about:
- different types of mortgage
- different mortgage deals currently available, including comparison tables
- how much you can afford to pay on a mortgage, including a mortgage calculator
- hints and tips about managing your money
- accident, sickness and unemployment insurance
For help in finding an independent financial adviser, contact one of the following organisations:
Independent Financial Promotions (IFAP)
Institute of Financial Planning (IFP)
Personal Finance Society (PFS)