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Extra Risk Involved

By: Emma Eilbeck BA (hons) - Updated: 14 Jul 2010 | comments*Discuss
Mortgage Risk Repayments Lender Interest

Nobody knows what the future holds when they take out a mortgage, you could be a single, free spirited soul when you embark on a mortgage, but find yourself married with two children further down the line.That is why it is important to be aware of the risk you take on when you take out a mortgage. The first obvious risk is that you won’t be able to afford to pay back your mortgage and your dream home could be repossessed.


Repossession is something that happens in the worst case scenario, and will only effect a few people, however this does not mean that you do not have to keep it in mind, as it is not a very pleasant experience should it happen.Most lenders should warn you when you take out the mortgage that your home could be repossessed should you not keep up your repayments.They are required to tell you this by law, so don’t panic if they rhyme it off to you when you take out a mortgage.

The best way to avoid repossession is to make sure that you can afford the mortgage payments in the first place.It is important to look at your current circumstances and work out if you will still be in the same position in a couple of years time, for example will you be planning a family or will you be taking a career break?

All these things are important factors in deciding what type of mortgage you agree to and how much you can afford to pay back.So it is maybe worthwhile taking time to sit back and think about the future before you embark on a mortgage, if you see any uncertainty ahead it may be worth holding off a few years.

Other Borrowings

It is also important to think about any other payments that you may have coming out of your account, such as a loan for a new car, these can also determine whether you will be able to pay back your mortgage.The thing that catches most people out is the changing interest rates, so if you are considering a tracker mortgage you must prepare for the worst and budget for it.

One of the riskiest things you can do is take out a mortgage with a friend or a partner. If you plan to do this you must also think about what might happen if you fall out or no longer want to live together. It can be a tricky thing trying to sell a property and divide the assets between two people, so it is best to be 100% sure that you get on well with the person before you commit to a mortgage.

House Prices

Don’t be fooled into buying a property and thinking it is guaranteed that it will increase in value.In some cases your house may fall in value, which means your house will be worth less then your mortgage, which is often referred to as negative equity.It is worth taking this into account if you are borrowing the majority of what the house is worth from the lender. You should choose the location well and not rely on it growing in value, you should always have a safety net.

There are always going to be risks involved in everything that you do. As long as you budget accordingly and do not bite of more than you can chew, then you shouldn’t have any problem when paying off a mortgage. It is important to always stay on the side of caution, and if anything seems to risky to you, then it’s best to be safe not sorry.

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