Keep up with repayments to avoid a charging order
When you take out a new mortgage or remortgage it is essential that you keep up with repayments or your lender could seek a charging order against you. This is only likely to happen in extreme cases when you have debt problems, but cover yourself by not borrowing beyond your limits.
In simple terms, a charging order a court order to repay a debt that gives your creditor security that will you pay. Just as you might use your home to get a secured loan, a charging order will use your home as security against your debt. If you already have a court order against you ordering you to repay a debt and you have not paid, the creditor may be able to apply for a charging order.
This gives the creditor a certain amount of security that the debt will be repaid in the future. However, a charging order can only be taken out against you in the courts and you will be given an opportunity to stop it.
If you have a number of creditors you can argue, for example, that a charging order would give one creditor an unfair advantage over your other creditors. Or if you have negative equity where your mortgage or remortgage is worth more than your home, then you can argue that a charging order is pointless as the value of your home does not cover the debt.
However, for most people a charging order is a worst case scenario. The key is to avoid defaulting on your mortgage or remortgage payments in the first place. If you find yourself in financial difficulty and struggling to pay off your re mortgage, there are a number of steps you can take to take the pressure off.
Remortgage – Remortgages are a great way to reduce your monthly repayments. If you are on your lender’s standard variable interest rate you could save up to two percent in interest, which equates to about £100 per month.
Increase the term – If you are on a 25 year mortgage or remortgage, why not extend it to 30 years to reduce repayments. You will end up paying more interest over the term of the mortgage or remortgage, but this is a good short term solution to take the pressure off. However, if you are locked into a fixed rate mortgage or remortgage, you may be fined for this.
Take a payment holiday – If you’ve hit hard times you should take a payment holiday from your remortgage. Lenders are becoming increasingly flexible so you should be able to avail of a payment holiday from your mortgage or re mortgage.
There are plenty of options to help you if you run into financial difficulties. You could take in a tenant, consider an interest only mortgage or remortgage or simply try to budget a bit more effectively.
In more extreme circumstances you might have to seek the help of a debt counselling agency to help you avoid a charging order. Also, don’t be afraid to approach your lender and explain your circumstances to them. They might be more understanding than you think. Whether or not you are in financial difficulty, you should consider a cheap remortgage as it could save you thousands of pounds.
