Mortgage Problems
Mortgage arrears
If you are in mortgage arrears, your mortgage lender will want you to clear them. If you don’t do this, they will take action through the courts to get you evicted from your home (seek possession). This will allow them to sell the property and use the money from the sale to help pay off the debt.
However, if your lender knows that you are trying your best to stop the debt increasing, they might allow you more time to sort the problem out. Depending on your circumstances, you may have several choices, but you must act quickly.
Cutting down your monthly mortgage costs
You will need to be able to keep up with payments on your current instalments, as well as pay off the arrears. If your financial difficulties are only short-term, you could think about asking your mortgage lender if they will agree to cut down your monthly mortgage costs for a short time. Depending on the mortgage you have, you may be able to:
- reduce your monthly interest payments
- increase the period of time over which you pay the mortgage. This would mean paying more interest over time
- suspend repayment of the amount you borrowed (the capital) and make interest-only payments
- find a cheaper mortgage deal with another lender. You may have to pay charges for changing your mortgage lender and you will still have to pay off any arrears. The Financial Services Authority (FSA) website has information about switching your mortgage at: www.moneymadeclear.fsa.gov.uk
- reduce the payments on your endowment policy
- stop paying into your endowment policy, if you have an endowment mortgage. You will have to make up these payments later.
Making any changes to an endowment policy is complicated and financially risky. You should seek independent financial advice first if you are thinking of doing this.
Paying off your arrears
You will need to try to agree with your mortgage lender about how to pay off your arrears.
If you need help with financial problems you can contact our Social Inclusion Officer.
Before you do this, you should first work out how much you can afford to pay. Work out how much money you’ve got coming in and what your other outgoings are - including other debts. You may find it helpful to ask an experienced debt adviser to help you do this.
