Many homeowners especially those with a mortgage loan to pay every month are experiencing tough times as a result of the global credit crunch and the recession that has followed. The impact of this is currently being experience by homeowners all over the world. The current recession which initially started as a financial crisis has now moved into the real economy causing global economic growth to slow down. The current recession hits homeowners in the following ways:
- Because of the credit crisis and stricter lending criteria imposed by banks obtaining a mortgage loan is a lot more difficult than it was a few years ago. Less people are able to qualify for a mortgage, therefore there are fewer buyers and as a result of supply and demand factors house prices decline. Many homeowners are in the unfortunate position of owing more on their mortgages than the property is currently worth.
- Slowing growth means that many firms are retrenching employees and many mortgage payers are suddenly facing the possibility of retrenchment.
- Disposable incomes are declining across the board , even if you are lucky enough to still have your job , tough business conditions mean that firms are less likely to take on new people and even less likely to afford annual increases in salaries and wages. In fact in some beleaguered industries workers and management may have to take salary cuts.
All of these factors mean that it is becoming increasingly difficult to pay your mortgage every month. Debt levels have increased drastically over the last few decades especially in the Anglo-Saxon economies and many households not only have mortgage payments to worry about, but are also faced with credit card bills, car payments and other debts.
Although the state of the economy may seem depressing there is light at the end of the tunnel and the good news is that the crisis will end. Most Economists forecast that during 2010 the US economy should start to slowly recover, with the rest of the world following suit. Your strategy should be to ensure that you are able to be a part of that recovery without having a serious debt overhang from the last boom - bust cycle. Here is how you go about it:
- You are battling to make your mortgage payments, talk to your mortgage institution. Many have specific programs in place to help you keep your home. Remember the last thing your mortgage provider wants is to foreclose on your home, especially in a poor property market.
- Make a list of your all your debts and prioritize them, most importantly pay your mortgage first, you need your car to get around and to go to work so pay that next. Unsecured debt should rank last and be paid last. If your are unable to pay any of your creditors always communicate with them and explain why you are not paying them or paying them less than the minimum payment. As long as they are getting paid something they should be happy and always communicate with your creditors in writing.
- Set up a budget for your family and cut out any luxury spending. Luxury spending includes dining out, movies or getting that hot new fashion accessory. Shop for bargains - they are out there because retailers are eager for business in these tough trading conditions. Always use any savings to pay down your debt.
- If you are a smoker or enjoy the odd drink, consider quitting, these are expensive habits and will end up saving you a fortune.
- Consider growing your own vegetables and herbs if you have a garden. It more environmentally friendly, healthier and you'll be amazed at how much better they taste and you will save a bundle.
- Look for ways to supplement you income, whether it means working overtime or taking a second job waiting tables or tending bar.
- Try car pooling instead of running you own car and if you are lucky enough to live in an area with good public transport then make use of it.
- Sit down with your family and look for more ways to save money, it's a lot easier to implement if everyone buys into the idea.
- Lastly set goals and if you meet certain objectives reward yourself and your family, this will ensure that everyone stays motivated.
Any savings or additional income that you make should be used to pay down your debts, starting with the most expensive debts, always remembering to make sure that your mortgage is paid first.
Doug Gauld is an internet marketer specialising in personal finance after working in the financial services sector as a Certified Financial Planner and marketing specialist. Visit his website Loanfinder for articles and advice on mortgage loans as well as free resources like mortgage loan calculators.
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