Mortgage arrears - what can I do?
Arrears on your mortgage don't necessarily mean you'll lose your home, so don't panic. In fact, you would have to go several months behind on your payments before most lenders would consider taking action.
However, you will have to repay the arrears at some point, so it's best to get help as soon as the problem starts - before the debt has time to mount up.
If you can afford to, lenders will usually let you repay the arrears gradually on top of your usual payments.
For example, you might pay £20 a month more until the debt has been cleared. If you can't afford your payments, lenders may agree to a 'payment holiday' in which your payments are frozen or reduced.
Interest will continue to grow, so the sooner you can start making payments again the better.
A payment holiday can only last for so long, so if it looks like things won't get any better, it may be time to get expert advice.
What is repossession?
If you repeatedly miss payments and it becomes clear you won't be able to repay what you owe, your home could be 'repossessed'. This means your lender(s) can arrange for your home to be sold to raise some or all of the money they are owed.
If you act early enough, there is nearly always something you can do to avoid repossession. If other debts are contributing to the problem, you should be able to arrange an affordable repayment plan that makes room for your mortgage payments and helps you repay your arrears. Find out what help is available here.
It's important to remember that repossession is very rare and will only happen as a last resort.
How to negotiate with mortgage lenders
Talking to your lenders about problems with payments can be daunting, but they will probably be more willing to help than you think.
The best approach is to be completely honest and upfront with your mortgage lender. Contact them by letter or by phone - whatever you feel comfortable with - and tell them about your situation. Tell them how much you can realistically afford to pay and what has caused the situation.
Lenders will often let you have a 'payment holiday', during which payments are reduced or completely frozen. Interest will continue to grow during this time, so the sooner you can start making full payments again the better.
If you can't come to an agreement with your mortgage lenders, or if other debts are contributing to the problem, then you may want to seek professional debt advice.
What to do about missed mortgage payments
If you have already missed mortgage payments, you may be concerned about action from your lenders. It's important that you address your arrears as soon as possible, but they are unlikely to take serious action unless it's clear you'll never be able to pay the arrears back.
Your lender should allow you to pay back your arrears over time, on top of your regular mortgage payments (so you might pay an extra £30 a month, depending on what you can afford). If you can't afford to do this the situation could become more serious, so it's a good idea to get advice from an expert.
What is Support for Mortgage Interest?
If you're a homeowner and you claim certain benefits, you may qualify for help with paying the interest on your mortgage. This will be added to your benefit payment.
Can I remortgage?
It's not impossible to remortgage if you have arrears, but it may be difficult.
If you arrange a remortgage with a new lender, the arrears will have to be repaid. If you can't pay them off upfront, this will involve borrowing slightly more on your new mortgage. But remember that this reduces your 'equity' and will make it harder to get the best deals.
Mortgage payment holidays
If you are temporarily unable to make your mortgage payments, your lender might agree to a 'payment holiday'.
This involves your payments being reduced or frozen for an agreed period (e.g. 6 months). You'll have to make full payments again as soon as you can afford to.
But remember, a payment holiday can only last so long. If it looks like your problem is long-term, your lenders may end the payment holiday and start taking action against you.
You are in 'negative equity' if you owe more on your mortgage than your house is worth (meaning you couldn't pay off the mortgage in full by selling your home).
Lenders are unlikely to offer you a remortgage if you are in negative equity, because it's harder to guarantee they'll get their money back. But this doesn't mean you'll lose your home - it just means you'll start paying your lender's Standard Variable Rate (SVR) when your current deal ends.
This could increase your payments, so if you think you're going to struggle then it's important that you let your lender know.
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