If you are struggling with your mortgage, or think you may struggle soon, act early. There may be ways to reduce the immediate pressure and avoid the problem becoming more serious.
The sooner you contact your lender, the more options you may have.
If You Cannot Pay
Mortgage problems can happen for many reasons. Your income may fall, your costs may rise, or an unexpected change may put pressure on your finances.
First, work out what you can afford. Then contact your mortgage lender as soon as possible.
Do not wait until you have missed several payments.
Your lender should discuss your circumstances with you and consider what support may be suitable.
Contact Your Lender Early
You do not need to wait until you miss a payment before asking for help.
If you know that your finances are about to change, contact your lender before the problem starts. For example, you may be facing redundancy, illness, reduced hours or another fall in household income.
Explain what has changed and what you think you can afford.
Your lender may ask about your income, spending and other debts so that it can understand your situation.
What Help Could Be Available?
The options depend on your mortgage, lender and circumstances.
Possible changes may include:
- changing your payment arrangements
- extending your mortgage term
- temporarily reducing payments
- temporarily switching some or all of the mortgage to interest-only
- agreeing a plan to deal with missed payments
However, reducing your payments now can increase what you pay later.
For example, extending the mortgage term may lower your monthly payment, but you could pay interest for longer.
So, make sure you understand both the immediate benefit and the longer-term cost.
If You Miss a Payment
A missed mortgage payment is known as a mortgage arrear.
If this happens, contact your lender rather than ignoring letters or calls.
Your lender will normally want to understand why you have fallen behind and whether the problem is temporary or likely to continue.
If you can afford to pay something, explain how much. Do not promise payments that you cannot realistically maintain.
Mortgage Arrears
Mortgage arrears do not usually disappear when your normal payments restart.
You will normally need to agree how the outstanding amount will be dealt with.
This could mean paying something extra each month or making another arrangement with your lender.
Before agreeing to higher payments, check that they are affordable alongside your normal household bills and other essential spending.
Prioritise Your Mortgage
If money is tight, some bills have more serious consequences than others.
Your mortgage is secured against your home, so falling behind can eventually put your home at risk.
That does not mean you should ignore other essential bills. Instead, get help with your overall finances if you cannot meet all your commitments.
A free debt adviser can help you look at the whole situation rather than dealing with each debt separately.
Check Your Insurance
If your income has fallen because you cannot work, check whether you already have insurance that could help.
For example, you may have:
- income protection
- mortgage payment protection
- critical illness cover
- other cover linked to your employment or mortgage
Check the policy rather than assuming you are covered. Each type of insurance has its own conditions, exclusions and waiting periods.
Check What Support You Can Claim
A change in income may mean you are entitled to benefits or other financial support that you did not previously receive.
Check your entitlement rather than assuming that help is unavailable.
Homeowners receiving certain qualifying benefits may also be able to get Support for Mortgage Interest (SMI).
SMI is a government-backed loan that can help towards the interest on an eligible mortgage or certain home-improvement loans.
It is not a grant. The amount received normally has to be repaid with interest when the property is sold or ownership is transferred.
Avoid Expensive Short-Term Borrowing
Using another loan or credit card to cover mortgage payments can sometimes make the situation worse.
You may solve this month’s mortgage payment while creating another debt that also needs to be repaid.
Before borrowing more, look at why there is a shortfall and whether the additional debt will genuinely solve the problem.
If you are already struggling with several debts, get free debt advice before taking on more borrowing.
Be Careful With Your Mortgage Term
Extending your mortgage term can reduce your monthly payment.
For example, spreading the remaining balance over more years means each repayment may be smaller.
However, you will usually pay interest for longer, so the mortgage can cost more overall.
A longer term can be useful when affordability is the immediate problem, but understand the long-term effect before agreeing to it.
Interest-Only Payments
In some circumstances, temporarily paying only the interest can reduce your monthly mortgage payment.
However, this does not normally reduce the amount you originally borrowed.
That means you still need a way to repay the capital later.
Interest-only arrangements can therefore provide breathing space, but they are not the same as reducing the mortgage debt.
What If Interest Rates Rise?
If you have a variable-rate mortgage, your payments may change when interest rates change.
A fixed-rate mortgage gives more certainty during the fixed period. However, your payment could change significantly when that deal ends.
If your fixed deal is approaching its end, check your options early rather than automatically moving onto your lender’s standard variable rate.
You may be able to switch to another deal with your existing lender or remortgage elsewhere.
What If You Cannot Afford the Mortgage Long Term?
Sometimes the problem is not temporary.
If your income has permanently fallen or the mortgage is no longer affordable, continuing to rely on short-term solutions may simply delay a difficult decision.
Speak to your lender and get independent advice.
Depending on your circumstances, options could include making longer-term changes to the mortgage or considering whether selling the property yourself is appropriate.
Selling a home is a major decision, so get advice before acting.
Could Your Home Be Repossessed?
Repossession is generally a last resort rather than the first response to a missed payment.
Mortgage lenders must follow rules when dealing with customers in financial difficulty and should consider appropriate ways of resolving arrears.
However, mortgage arrears are serious.
If an affordable solution cannot be found and arrears continue, the lender may eventually take court action to repossess the property.
This is why early contact matters.
If Repossession Is Threatened
Do not ignore letters from your lender, solicitor or court.
Get independent help immediately.
Even if court proceedings have started, it may still be possible to reach an arrangement depending on your circumstances.
Keep copies of letters and other documents, attend any court hearing and provide the information requested.
Free housing and debt advice may also be available.
Get Free Help
You do not have to deal with mortgage problems alone.
Free help is available from organisations such as MoneyHelper, Citizens Advice, StepChange and National Debtline.
They can help you understand your finances, debts and possible next steps.
Be cautious about paying a company for debt help before checking whether suitable free advice is available.
Before Making a Decision
Start by understanding the size of the problem.
Work out your income, essential spending, mortgage payment, other debts and any amount you have already missed.
Then speak to your lender and check what support may be available.
Most importantly, do not ignore the problem. Mortgage difficulties are usually easier to deal with when action is taken early.
Key Points
- Contact your lender as soon as you think you may struggle.
- Do not wait for mortgage arrears to grow before asking for help.
- Lower payments now can sometimes increase the long-term cost.
- Check insurance, benefits and other support that may be available.
- Avoid taking on expensive new debt without considering the consequences.
- Get free independent advice if you cannot make your finances work.
- Mortgage arrears can eventually put your home at risk.
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