Mortgage Arrears FAQ

When your mortgage payments have gotten too much to manage, you’ll need to come to an agreement with your mortgage lender. Contact your mortgage lender to let them know you are having payment difficulties in order to prevent them from taking immediate court action. If they take court action, they may be able to take you home from you and sell it in order to pay off your debt. If you contact them, it may buy you some time to organize your next payment, or compromise a temporary lower payment scheme

• How to reduce your monthly mortgage expenses
• Ways to increase your income when you’re in mortgage arrears
• Getting back on top of your arrears
• How do I deal with my mortgage lender?

How to reduce your monthly mortgage expenses

Reducing your monthly mortgage payment on either a temporary or permanent basis will make it easier for you to catch up on your arrears and start tackling your debt head on. Here’s ways to start:

1. Talk to your lender
The first thing to do when you are in mortgage arrears is to contact your mortgage lender. Depending on you lender and mortgage, you may be able to:
2. Lower your monthly payments.
This means you’ll be paying your mortgage over a longer period of time, and hence end up paying more interest in the long term.
3. Make interest only payments. This means you’ll be suspending repayments on your capital (the amount you borrowed).
4. Change your mortgage lender.
Alternatively, you can look around for a cheaper mortgage deal. Be aware that if you do change lenders, any arrears already on your mortgage will still have to be repaid to the original lender, and you also may have some charges for changing lenders.
5. Alter your Endowment policy.
Reducing or temporarily pausing payments of your endowment policy should never be done without seeking financial advice first. Because the process can be confusing and risky, make sure you consult a financial advisor first. If you stop making payments, you will still have to make them at a later date.

Ways to increase your income when you’re in mortgage arrears

Increasing your income will make your mortgage arrears easier to pay off. Consider these options:

1. Is getting a second job part time an option?
2. Have you got a spare room in your house you could rent out short term?
3. Could you let your house out and move into cheaper accommodation?
4. Have you found out if you are eligible for any benefits, tax credits, or exemptions?
5. If you’re already on some kind of benefits – are you sure you’re getting the right amount?

Find out if these could be options for you. To let out your house or get a lodger, you may have to get your mortgage lenders permission first.

Getting back on top of your arrears

To get up to date on your mortgage payments, start by figuring out how much you can afford to pay back monthly by drawing up a budget. Include all of your monthly expenses (and your ongoing mortgage payments) and incoming payments to see how much you have left over. Once you have discovered how much of your arrears you can pay back per month, approach your lender to compromise on a monthly payment system.

Your lender may give you the choice of how to pay back your arrears. Some will be happy with you paying extra with your monthly payments until the arrears are paid, whereas some may allow you to add the total arrears to your capital so you pay it back throughout the rest of your mortgage period.

If your lender will not accept you paying your mortgage in chunks, they might insist you make one large payment. If you can’t compromise on this, you may have to find a separate loan, or borrow money from family or friend and repay them using the money you have budgeted for.

How do I deal with my mortgage lender?

Approach your lender by writing them a letter that states your situation and your payment proposal. It might help to include proof that you can afford the payments you’re offering them. Keep a copy of your letter.

Whilst you’re waiting on a response from your lender, it might help to start making payments to show you’re making an effort.

If your mortgage lender doesn’t find your offer satisfactory, try to compromise with them to come to an agreement that will suit both of you. If you can’t come to an agreement, your mortgage lender may take you to court. At the court you’ll be able to show your letter of offer and the payments you have been making to the lenders so the judge can decide whether you can continue to make these payments, or if the lender can repossess your house.

It’s always best to get debt advice before your arrears reach this stage.