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Mortgage arrears

Falling into mortgage arrears can make people feel frightened and vulnerable. After all, every man’s home is his castle, but there are ways to escape from this situation.

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It’s vital not to ignore mortgage arrears however frustrating and upsetting the situation may appear. To prevent against house repossession, any issues associated with your mortgage need to be addressed as a priority.  Ideally mortgage arrears should be cleared as quickly as possible. This usually depends on the period of time over which they have accumulated and the type of mortgage involved. Remember that mortgage lenders are generally willing to negotiate how best to achieve this and so establishing, and then maintaining, contact with them is crucial.

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We could offer you a solution that will reduce your monthly payments with the potential of freezing interest and charges, and even writing off some of the debt.

The options PayPlan can offer

The options PayPlan can offer vary depending on your situation, and there is no obligation to progress if you do not wish. We will simply talk through the different solutions to help you decide what is best for you. For more information on the solutions we offer/advise on, please see: and .

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Talk it through

Taking into account that everyone’s circumstances are different, it’s a good idea to explain why your payments are in arrears – it will also reassure the lender that you are both aware of and dealing with the problem.  It’s helpful to be honest about your circumstances which may have changed – for example, redundancy, illness, death of a partner, relationship or family difficulties. Revisit the small print, and check the terms and conditions of your cover for any mortgage protection insurance you may have.  If your property is currently worth substantially more than the total mortgage outstanding, your lender may allow you to repay the arrears over a longer period, dependent on your personal circumstances. Please note: this would need to be specifically agreed with your lender so you would need to contact them to discuss this.

First steps…

Work out first what you can afford to pay the mortgage lender. The best way to do this is to keep a record of all your outgoings against your income.

Moving forward

We’ve listed a few possible ways of tackling mortgage arrears below – one of them might be right for you. PayPlan are not authorised to give advice on mortgages and can not guarantee that your lender will accept any of the possibilities below. However, contact your lender and they can discuss these options with you in detail to make sure you are getting a solution that is right for you.

Interest only mortgage

If you took out a repayment mortgage, you’ll be paying a monthly instalment of interest and capital. For a short period, your lender may accept payment of the “interest only” element, particularly if you foresee the ability to resume normal payments again relatively quickly.

Extending the terms of the mortgage

If you have a good track record, your lender may agree to increase the mortgage beyond its original terms, ie, an increase from 25-30 years. This will reduce the monthly payment in order for you to make a contribution towards the arrears you have. This solution will depend on your individual circumstances and retirement age. For more information about getting a remortgage may be able to help.

Increasing your income

Below are a few ways of potentially increasing your income to maximise funds:

  • Explore whether you can take in a tenant or lodger who can boost your income. The government’s rent a room scheme allows you to earn £4,250 a year, or just under £82 a week, from a lodger without paying tax on it. There is more information about this at http://www.gov.uk. You may need the permission of your mortgage lender.
  • You may be entitled to benefits such as Working Tax Credit, Child Tax Credit, Disability Benefits, Income Support top-up or Council Tax Reduction. They can make a real difference to your income and help with your mortgage payments.
  • Investigate whether you could lower life insurance or house and contents premiums.
  • If you are concerned by mortgage arrears contact your lender directly as they may be able to help with a plan.
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