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Mortgage arrears and repayment problems

If you're struggling to repay your mortgage or you're in arrears, there are a number of things you can do, starting with speaking to your lender.

Key points

  • If you're struggling with mortgage repayments, tell your lender as soon as possible
  • You may be allowed to extend the term of your mortgage, switch to interest-only or take a payment holiday
  • Repossession should be a last resort after every other option has been exhausted

Getting a mortgage can be a stressful experience, and keeping up with repayments once you've bought your dream home can be worrying.

Since the 2008 financial crisis, getting approved for a mortgage you can't afford is harder.

The 2014 Mortgage Market Review (MMR) was brought in to make the mortgage market more stable.

The affordability rules introduced by the MMR aimed to ensure that people could afford their mortgage repayments and to reduce the number of people forced to default on their loans.

But the MMR doesn't protect against changing circumstances after taking out a mortgage - illness, job losses and family upheaval are just a few things that could make it difficult to pay a mortgage.

If you're struggling to pay your mortgage and are worried about going into arrears, there are steps you can take. House

Contact your mortgage lender

Your first port of call should be your lender. Tell them that you're struggling with repayments to see if they're able to help.

Discuss ways of reducing your payments with your lender. If you currently have a 25-year mortgage, you might be able to extend it to 30 years or longer - that way, your monthly payments will drop.

Lenders may be reticent to do this if you're in an older age group, so take that into account. Also, it does mean you'll pay more interest overall.

Some lenders offer mortgage holidays after you've been paying for a certain amount of time, particularly if you've made overpayments during that time.

Taking a few months off could give you breathing room and time to address any solvable problems.

You may also be able to move to an interest-only mortgage for a period of time, which will again reduce the amount you pay monthly.

Speak to your lender as soon as you're worried about your repayments - don't leave it until it's too late.

If you've already fallen into arrears, a lender must give you full details within 15 days of the money you owe, charges incurred and the amount left to pay on your mortgage.

They must also give you a reasonable amount of time to repay the money and tell you what will happen if you can't clear the arrears.

Do you have MPPI (income protection)?

If you have Mortgage Payment Protection Insurance (MPPI), depending on the circumstances and the policy you could have your mortgage payments covered in full.

The insurance is a form of - or an element of - income protection and could cover your mortgage payments in cases of accident, sickness and/or unemployment.

Many plans could pay your mortgage for up to 12 months or until you return to work, but you can take out longer policies.

Government help with mortgage arrears - the SMI scheme

The government may be able to offer help if you're struggling with your mortgage (if you have a MPPI policy you'll need to claim from that first).

The government won't pay your mortgage for you, but the Support for Mortgage Interest (SMI) scheme may be able to cover your interest. How to cut the cost of your mortgage

This means you'll either have to find the rest of the money or temporarily switch to an interest-only mortgage if your lender will allow this.

If you're eligible, the government could meet interest payments on the first £200,000 of your mortgage for the time you can't afford them. The payments would be made direct to your lender.

You won't be able to claim SMI if you have substantial savings, or if you own more than one residential property.

While SMI was previously a benefit, the government announced plans in the Summer Budget 2015 to turn it into a loan from April 2018.

This means that any claims made after April 2018 will have to be paid back to the government when you return to work, or when you sell your home.

Cut your costs

This may seem obvious and you've probably already done it, but if you're struggling to meet mortgage payments there are a few ways to cut costs that you might not have thought of.

Take a look at your outgoings and consider how they can be trimmed back.

Whether it's spending a bit less on the weekly shop or cutting down the amount you drink, you can make big savings by making a few small changes. Read our money-saving tips for some ideas.

One of the quickest ways to save on outgoings is to cut your bills. Whether it's gas and electricity, car insurance or home insurance, you may be able to save by comparing and switching supplier.

Look into debt management measures

If you're already saving as much as you can and still can't make your payments, you may need to explore other options.

Debt charities such as StepChange and independent agencies like Citizens Advice can offer free, impartial advice.

They may be able to tell you about something you haven't considered, or show you a path you otherwise thought unavailable to you.

Selling or downsizing

If you don't think your circumstances will change any time soon, it may be worth thinking about selling your home or downsizing to a more affordable property.

Selling your home and renting for a time is preferable to defaulting on your mortgage and having your home repossessed, as it gives you the option to buy again when you're in a better financial position.

It also allows you to be in control of the sale of your home, as you may be able to achieve a better sale price than if it was repossessed.

You'll also preserve your credit status and avoid mortgage default fees.

However, if your circumstances have changed and you're no longer employed, you may find it harder to get a new mortgage.

If your credit rating has taken a hit since you bought your home, it's worth looking into bad credit mortgages. There are other options, such as guarantor mortgages, that could help you move home.

Read our guide on what to do if you're a mortgage prisoner for more information.


Ultimately, if you're unable to repay your mortgage, the lender may decide to take your home.How to improve a credit score

Repossession should be the last resort for lenders, but if you're in arrears and can't find a way to repay your debt it may become a possible outcome.

Lenders don't want to repossess your home - they'd rather you kept paying your mortgage, and they'll try to help you keep doing that.

Make sure you tell your lender as soon as possible if you're struggling with your mortgage repayments. That way, they'll be much more likely to help.

If your home is repossessed it may go up for auction, which means it might sell for less than its market value.

If the sale of the house doesn't cover your mortgage debt, you may still owe your lender money.

If there's a shortfall, the debt may be pursued by another company and not your lender. Interest may also be added to your debt, and a lender has to let you know regularly how much interest is added.

A lender may not wish to seek repayment, but this depends on the circumstances.

By Emily Bater