Buying a house is a huge financial commitment, which is why lenders conduct such rigorous affordability checks when assessing whether to offer you a mortgage.
However, circumstances can change and it’s all too easy to find yourself struggling to make your repayments.
If you can't afford or fail to make a mortgage repayment, you should contact your lender immediately as this will effect your credit score. Your lender should work with you to try and come up with a way to restart your payments.
This could either be by paying back the amount you’ve missed in full, or you may be able to pay the arrears in instalments until you’re back on track.
Remember to be honest with your lender about the state of your finances so that they can help you choose the right option.
If you have missed a mortgage payment or are at risk of missing your next payment:
Be proactive and create a budget detailing the incomings and outgoings for your household. Citizens Advice has a budget tool that you can use
Identify where you can cut back to save money
Speak to a debt adviser who can help run you through the different options available. You can contact Citizens Advice or StepChange and speak to one of their team members for free
Contact your mortgage lender to let them know that you’re struggling
Discuss what you can afford to pay back with them and whether there are any other options available to take the pressure off
Mortgage arrears are when the payment for your mortgage is late.
It’s classed as a priority debt, which means that it takes precedence over paying off other debts, like credit card or store card bills.
You’ll usually receive a letter from your lender within 15 days of the missed payment notifying you that your account is in arrears.
However, it’s in your best interest to contact your mortgage lender before this happens to notify them that you’re struggling to keep up with your payments.
This is where the following options may be available to you. However this will be a subject to your lender and your financial circumstances.
This will lower the amount you pay each month, but of course you’ll be making payments for longer. For instance, if the mortgage term goes past your retirement age would you still be able to keep paying them comfortably?
You’ll only pay off the interest on your mortgage for a set period of time. You will still have to pay off the entire amount you originally borrowed before your mortgage term ends.
This is where you won’t have to make mortgage payments for an agreed number of months. You may still be charged interest during this time, which increases the amount you pay back overall. Also, you’ll still have to cover payments you missed during the holiday before your mortgage term ends.
You may be able to receive help from the government to meet your mortgage interest payments if you’re a low-income household. It’s a loan secured against your property which starts 39 weeks after you’ve claimed for it, which means your mortgage arrears could really stack up. You won’t have to pay back the loan until you move house or die.
Your lender may help you to sell your property so they’re able to recoup the debt owed to them. You could have up to 12 months to sell your home and mortgage payments may be reduced while it’s on the market. They may also reimburse estate agent and solicitor fees.
If you already have this type of insurance, it can help to cover your mortgage payments for up to 12 months if you’re unable to work because of an accident or illness.
You’ll want to avoid this happening at all costs because your lender could apply to the court for a possession order. You’ll be notified at least two weeks before this happens.
This means they can sell your house and use the money to cover the debt you owe them.
You can challenge the court order by using the defence form you’ll be provided with to explain why you should stay in your house and how you’ve tried to pay your mortgage arrears.
Contact Citizen’s Advice or StepChange if you find yourself in this situation, they’ll be able to guide you through the process and give you vital information.
Missed mortgage payments will affect your credit report for at least six years. Late or partial payments will negatively impact your credit score and lead to late fees.
You can contact Citizens Advice or StepChange and speak to a debt adviser for free.
They’re completely impartial and can help you create a plan to get your finances back on track. They can also advise you on the different options available and how to approach your mortgage lender to reach a resolution that works for both of you.
It’s important that you contact your mortgage provider as soon as possible, too.
Ignoring the situation isn’t helpful, in fact it could make it a whole lot worse.
Although scary, facing the problem head on and contacting your mortgage lender before you start missing mortgage payments is the best option. There may be an easy solution that takes the pressure off until you get back on your feet.
You also should avoid taking out more debt to cover your mortgage payments. Although it may seem like a payday loan or a loan shark could help in the short term, it’s vital that you steer clear of them at all costs.