What happens if you fall behind on your mortgage?

Falling behind on your mortgage can feel daunting. We’re here to help you understand your options, plan and take back control without any judgment.

What are mortgage arrears?

Mortgage arrears are the total amount of unpaid and overdue payments that happen if you don’t keep up with your mortgage.  

They’re considered a priority debt – the bills that carry the most serious consequences if you fall behind. Missing these payments can affect your access to essential services, like your gas and electricity supply and lead to legal action, so they must be paid before any other debts.

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

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

• 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’s priority is to create a plan to help you keep your home.

What should I do if I get a warning letter?

It’s normal to feel worried, but you mustn’t ignore these letters.

Talk to your lender as soon as possible and tell them you’re working on a plan. Just making contact can pause further action for a few weeks, giving you time to think.

How can I repay my mortgage arrears?

Your lender might ask you to pay the extra money over six months or a year. This depends on your mortgage lender and the agreement you have with them. If you can’t afford your repayments, the other choices could be:

• 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 only the interest for a short time until things improve. It’s worth checking if there’s any additional charges before agreeing to anything.
• Extend your mortgage: If you have 20 years left, your lender might agree to stretch it to 25 years. This could lower your regular monthly payment and help you focus on the arrears, though it isn’t a guarantee.
• 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 you both.

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

Can I take a mortgage holiday?

As with lots of options in this space, it depends and your lender is the one to speak to about this. A mortgage holiday is an agreement with your lender in which you temporarily pause or reduce your mortgage payments. It’s aimed at providing short-term help if your situation is temporary, like maternity leave or time off work.

Depending on your circumstances and previous payment history, your mortgage provider could give you a break of up to 12 months, during which interest will still accrue.

It’s important to bear in mind that not all mortgage lenders offer a payment holiday. Always check the terms and conditions of your agreement.

How can I increase my income to help repay my mortgage arrears?

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

• Check your benefits: You might be able to claim Universal Credit or other benefits. Use our free calculator today.
• 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 if you make your normal monthly payment and set aside an amount towards your arrears. If you miss these agreed payments, the lender can ask for an ‘Eviction Warrant’ that requires you to leave.

What’s a mortgage shortfall?

A mortgage shortfall can happen when your home has been repossessed and sold, and the money raised isn’t enough to pay your outstanding mortgage and any secured loans, as well as legal and estate agent fees.

Am I liable for a mortgage shortfall?

Start by checking your yearly statement. See when you last made a payment or said the debt was yours, as this can change what you need to do next. Then look at where the missing money has come from.

What if I owe mortgage capital?

If you owe mortgage capital, the original amount of money you borrowed from your lender, they have 12 years to chase you for this payment.  

What if I owe interest

Most lenders have up to 12 years to contact you about the debt, but many do this within 6 years.

If the debt is more than 12 years old, you may not have to pay it, although this is not always the case. This is because it may no longer be enforceable under the Limitation Act 1980. This is known as being statute-barred.

To check:

• Look at your credit report for any unpaid debt
• Check your bank statements to see when you last made a payment

The time limit can depend on:

• When the money was first owed
• When you first fell into mortgage arrears
• When the lender first acted
• When you last made a payment

What if I didn’t receive notification of my mortgage shortfall?

If you haven’t received a full breakdown of the mortgage shortfall from your lender, you could ask them to send you all the information they hold about your mortgage account. Making this request is free under the Data Protection Act 2018.

You may be able to complain to the Financial Ombudsman Service (FOS) if your lender didn’t write to you within six years of the sale to confirm the mortgage shortfall. Ask your lender for a copy of their complaints policy and take this route before contacting the FOS.

Should I negotiate with my lender?

Depending on your circumstances, you have a few options:

Contact your lender, explain your situation and make a reasonable monthly repayment offer. If you’re not sure what you can afford, we can help you work this out.

You could also consider an Individual Voluntary Arrangement (IVA), a Debt Management Plan (DMP) or a Debt Relief Order (DRO) as other ways to resolve your debt.

If you’re experiencing difficulties, such as illness or disability, with a very limited income and a large mortgage shortfall debt, it’s worth asking your lender not to pursue the debt.

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 don’t 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.

You could also consider talking 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.