The longer they put off paying off means that they end up owing more in the long term as interest on the interest will keep on ratcheting up. If those struggling to meet their repayments don't quickly see a change in their circumstances, namely finding a well paid job, then they may well end up in an even worse position than they were in when they originally applied for this state aid.
Braintree, Essex (PRWEB) December 5, 2008
The move to defer mortgage interest payments for struggling homeowners has been welcomed by specialist insurer Burgesses - with reservations.
The government announced on Wednesday that the interest on a home loan need not be paid for two years following the date the borrower could not afford the payments. It believes that this relief will avert the threat of repossession for many families that face falling on hard times in the current economic slowdown.
People that lose their jobs and are lumbered with a mortgage of up to four hundred thousand pounds qualify for help under the scheme.
Independent payment protection insurance specialist Burgesses believes that the initiative provides a much needed breathing space for borrowers allowing them to consolidate their outgoings so their finances are in a much better shape when they do return to the workplace.
Managing Director of Burgesses Sara-Ann Burgess said: "At last the government has made a very positive move that will ease the burden of possible repossession for very many people in the country"
However she sounded a word of caution. "What people need to remember is that there interest payments are not being written off - simply passed over to be paid another day.
"It is imperative that those people that need to take advantage of this welcome government intervention realise that they need to start repaying their mortgage interest on their own behalf as quickly as possible.
"The longer they put off paying off means that they end up owing more in the long term as interest on the interest will keep on ratcheting up. If those struggling to meet their repayments don't quickly see a change in their circumstances, namely finding a well paid job, then they may well end up in an even worse position than they were in when they originally applied for this state aid."
While people up and down the country may breathe a huge sigh of relief in the knowledge that their home is not in any immediate danger, they could and should have taken steps to ensure they were not burdened by the uncertainty of whether or not they were about to lose their home.
"By taking out an insurance policy that is designed to pay the mortgage when the policyholder becomes ill through accident, sickness or unemployment they could then relax safe in the knowledge that if the worse did happen then they would always have a roof over their heads," Burgess advised.
"This cover can be bought cheaply from an independent specialist provider like British Insurance and can be taken out online."