Paying off mortgage at expense of essentials is unnecessary

THE FIRST thing anyone finding themselves struggling to make mortgage repayments needs to remember is there is absolutely no shame in being where they are.

Too many people feel embarrassed about not being able to pay their debts – but the uncomfortable reality is there are tens of thousands of people in the same place.

More than 50,000 mortgages are in arrears for more than three months, with many more people just about scraping the money together on a monthly basis to service their loans.

More than 120,000 households have signed up to arrears repayment plans with the major utilities – a clear indication that they are not able to get by.

Many of the New Poor are resolutely middle-class and have this idea that contacting the Money Advice and Budgeting Service (Mabs) or the St Vincent de Paul Society for help is a degrading step and one which is beyond them. So they soldier on and lead lives that are increasingly miserable and stressful.

This attitude needs to change. Both organisations have been stressing since the recession first took hold they are there to help anyone, no matter where they live or what their background, and there should be no stigma attached to making contact with them.

Mabs should always be the first port of call. Admittedly there are waiting lists, but the service can give instant help over the phone and does fast-track urgent cases. It will help people to draw up a list of priorities, maximise their earning potential and claim everything they are entitled to from the State.

This can include all social welfare entitlements, including the mortgage interest supplement.

The next step is to write down all expenditure and income and work out how much is needed to clothe, heat and feed your family.

You can service your debts only with what is left, and if that is €400 and your mortgage repayments are €800 – then so be it. The lender involved will have to work with that figure.

People need to stop being scared of the banks. Burying your head in the sand and paying your mortgage at the expense of essentials is as foolhardy as not paying your mortgage at all.

The bottom line is people who are struggling to make payments need to talk to the institutions they owe money to and come to arrangements that suit their dramatically changed circumstances.

Someone who is paying off a full mortgage but going without proper food for their family has their priorities askew.

It may not always seem like it is the case but there are options out there, and the banks are increasingly open to suggestions because the last thing they want is more people falling into arrears.

People can, for instance, apply for a mortgage holiday – take six months or a year off from making payments so they can work towards getting themselves onto a more sound financial footing without the stress of trying to get the money together each month.

A better alternative is to ask (or increasingly, to insist) on switching to an interest-only mortgage for a period of between one and three years, or extending the mortgage from 20 to 30 years.

These steps ultimately increase the costs, but only in the long term, and they can dramatically reduce the monthly payments and are better than living a miserable hand-to-mouth existence.