Mortgage Arrears Help

What are mortgage arrears?

If you have fallen behind on your agreed mortgage repayments, you are in arrears. This basically means you owe the lender money and need to pay it back as soon as possible to avoid further action. Act quickly to ensure you keep a roof above your head.

What happens if you are in arrears?

If you fail to pay back what you owe on your mortgage, the lender will send letters stating that you must make a certain level of payment or you may lose your house. It’s important to read these carefully and keep the letters for your records.

Your lender may offer a repayment plan to help you clear your arrears, but this may cost you more in the long term, so always read the small print. If you do nothing, then you may be asked to attend a repossession hearing in court – this should be the last resort for you.

Remember, it’s in the lender’s best interests to help you make your repayments, so be open and honest with them.

How do I act on mortgage arrears?

To sort out your mortgage arrears, you should start by making a budget. You can do this by completing an Income and Expenditure form and getting an overview of what you have leftover at the end of every month. From this, you may be able to see what you can cut back on or where you can make money to put towards your arrears.

You can speak to PayPlan if you are in debt, and one of our advisers will be happy to tell you how to speak to creditors and ask for breathing space – a 30-day period for you to get your finances in order whilst repayments are paused.

Once you have put together a budget and sought advice, you can speak to your lender about putting a repayment plan together and getting your mortgage back on track.

When should I act on mortgage arrears?

You should try and deal with your mortgage arrears as soon as you notice you are falling behind on repayments. Don’t wait for your lender to reach out to you – try and deal with it early on to make sure you’re in a better financial position.

Should I prioritise mortgage arrears?

Sticking to your mortgage repayments should be your number one priority. It goes without saying that keeping a roof over your head is important for you and those who live with you, so make sure you prioritise your mortgage repayments and ask for help if you are struggling.

What will my mortgage lender do if I fall into arrears?

By law, your lender must keep you fully informed. They will:

• Send letters asking you to make payments.
• Offer reasonable repayment plans to help clear what you owe.
• Take you to court for a repossession hearing as an absolute last resort.

Remember, your lender does not want to take your home, as it can be a time-consuming and expensive process for them. In most cases, they want to agree on a sensible plan with you.

What should I do if I get a warning letter?

It is normal to feel worried, but you must not ignore these letters.

Talk to your lender as soon as possible. Tell them you are working on a plan. Just making contact can potentially pause further action for a few weeks, giving you time to think, although this is not guaranteed.

How can I repay my mortgage arrears?

Your lender might ask you to pay the extra money over six months or a year. If you cannot afford this, you have other choices:

• Pay over the whole mortgage term: If you speak to your lender, you might be allowed to spread your missed payments over the remaining years of your mortgage.
• Switch to interest only: You might be able to pay just the interest for a short time until things improve.
• Extend your mortgage: If you have 20 years left, your lender might agree to stretch it to 25 years. This will lower your normal monthly payment.
• Work out a repayment plan: By coming to a repayment agreement with your lender, you may be able to agree on a solution that works for both parties.

The Government’s mortgage charter outlines your rights and protections in more detail.

How can I increase my income to help?

Look for ways to bring in extra money or lower your outgoing costs.

• Check your benefits: You might be able to claim Working Tax Credit, Child Tax Credit or a Council Tax Reduction. 
• Rent a room: The government lets you earn up to £7500 a year tax-free by taking in a lodger. You will need your lender’s permission first.
• Lower your bills: See if you can find cheaper home or life insurance, or a cheaper energy tariff. Just be aware of any exit fees you may need to pay.

What happens if I go to court?

Going to court is difficult, but judges usually only let lenders take your home if there is no other hope of them getting back what you owe.

Often, the court gives a ‘Suspended Possession Order’. This means you keep your home as long as you make your normal monthly payment plus a set amount towards your arrears. If you miss these agreed payments, the lender can ask for an ‘Eviction Warrant’ to ask you to leave.

What is a mortgage shortfall?

If your house is sold but the money is not enough to cover what you owe, the leftover debt is called a ‘shortfall’. You are still responsible for paying this.

Lenders usually have up to 12 years to ask you for the money, but most try within six years. If they contact you, you can try to agree on a monthly payment plan or offer a single lump sum to settle the debt completely.

Can remortgaging help pay off debts?

What is remortgaging?

 Remortgaging means switching your current mortgage to a new one without moving house.

Can I remortgage it to clear what I owe?

If your home is worth more than the money you owe on it, you might be able to use this extra value to pay off other debts. This extra value is known as equity.

Things to think about carefully before remortgaging

Securing other debts against your home is a big step. Your home may be repossessed if you do not keep up with your mortgage payments or any other debt secured on it. Extending the time you borrow money can also mean you pay much more in total.

Talk to an Independent Financial Advisor to see if this is right for you. You can find one at www.unbiased.co.uk.

We can help you build a way forward

Having a solid plan is the most important step. If you are struggling with your mortgage repayments, we are here to help you find a way forward.

Get free, confidential advice online or call 0800 316 1833 to speak to one of our experts. We’re here to help you understand your options and find a practical solution.