For some years now, negative equity has been a real problem for many homeowners, with millions of people across the UK finding that they are in negative equity and wondering what to do next. The threat of negative equity leads to higher mortgage payments, which consequently could mean increasing your chances of arrears and even worse repossession. So we are here to give you some top advice on how to avoid being caught in the negative equity trap.
• Try to pay more on your mortgage every month – Obviously this will reduce the amount you have to pay, which will reduce your debt (if you have any) and help to cut the interest you are paying every month. This will normally be possible if you can comfortably afford your repayments, so you should look to make the most of it, because later down the line you may find you don’t have the funds available.
• Make savings for your payments – If you are in a situation where you can pay more than the bank will allow you to without penalty, then look to put some of the extra funds away in a savings account. Look around for the best rates of interest, but generally you will find that cash ISA’s are the best way to go. This can be used to boost your equity when you want to move house or re-mortgage.
• Home Improvements – A few minor home improvements can make a difference to the value of your home. Treat your home as if you were going to sell it, so make sure you fix anything that’s broken, keeps things clean and maintained and look at giving your house a lick of paint. Things as simple as this will help raise the value of your home.
• Work Bonuses – Make use of any bonuses you receive or any unplanned influx of cash as a lump sum payment off of your mortgage, rather than splashing out on luxuries which you do not necessarily need. This isn’t as exciting, and if you are worthy of a bonus then you will probably want to splash out a bit and treat yourself for your hard work. But sometimes you need to put your thinking cap on, a mortgage is a long-term investment so give yourself every opportunity to easily repay the debt and reduce your interest.
• Do not borrow from secondary sources – Do not be sucked into borrowing money from other places, such as credit cards. This may seem like a good solution, but all you are building yourself up for is more debt, and you will start to be chased from more than one company wanting their money.
• Treat mortgage payments as if they were rent – If you were renting a property you would make sure all your payments are made on time so that you do not risk losing your accommodation, so treat your mortgage payments the same. This way you will stay on top of your finances, and eventually you own your house.