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Mortgage arrears

Mortgage arrears or payment difficulties

If you can’t meet your mortgage repayments, or you’re worried you might fall behind, it’s important to contact your lender as soon as possible. Lenders have procedures for tackling payment difficulties and they’ll try to help. You can also get free independent advice from other organisations.

Contact your lender and agree a plan

Mortgage lenders are keen to help their customers sort out any payment difficulties. Also, the law says they must treat you fairly and take your circumstances into account. They may be able to come to a payment arrangement with you.

If you're struggling to make the payments

Depending on your payment history and whether your difficulties are likely to be long or short term, your lender might agree to:

reduce your payments for a set period
charge you interest only for a while, if you've got a repayment mortgage (usually you pay capital and interest)
give you a 'payment holiday'
extend your mortgage term to reduce your payments

If you're already in arrears

If you've already fallen behind, your lender will suggest a way to pay off the arrears gradually, alongside your usual payments. If you can't meet the extra payments, you may be able to delay them for a while or add them to your loan. Again, it depends on your track record.

Always pay what you can

Pay as much as you can manage every month. Keeping up regular payments (even if they vary) shows that you're committed. Your lender's more likely to treat you sympathetically and you'll minimise the arrears charges too.

If you took out your mortgage on or after October 31 2004

The Financial Service Authority (FSA) regulates most mortgages taken out from this date. Under FSA rules lenders must treat you fairly and send you regular statements to keep you informed about your current arrears position. There are also rules covering what the lender must do if it intends to repossess your home.

If you don’t keep up your repayments

It’s very important that you don’t ignore any payment problems. Mortgages are ‘priority debts’, which you should pay off first as your lender could repossess your home and sell it to get their money.

Working out how much you can afford

Your lender can help you work out how much you can afford, but you may prefer to do this yourself. A good starting point is to write down all your income and outgoings (apart from the mortgage) and see what you’ve got left. The Financial Services Authority (FSA) has an online budget calculator you can use.

Can I get financial help?

If you've lost your job or can't work because of illness

If you've lost your job or you're too ill to work, check whether you've got 'mortgage protection insurance' to cover your payments. The insurance payments may not start straight away - so contact your insurer as soon as possible.

Benefits that might increase your income

It's worth checking if you're entitled to benefits such as Working Tax Credit, Child Tax Credit or Council Tax Benefit. They can make a real difference to your income and help with your mortgage payments.

If you’re getting Income Support, Pension Credit or income-based Jobseekers Allowance

If you're claiming any of these benefits, you may be able to get help with your mortgage from the Department of Work and Pensions (DWP). After a certain period (depending on your circumstances and when you took out the mortgage), the DWP may pay the interest for you. But they won't pay any capital or any interest due on arrears. If you're 60 or over, or you've got certain special needs, you could get help straight away. Find out more from your nearest Jobcentre Plus or Pension Service centre.

Mortgage shortfalls after repossession

If your lender repossesses your home, they’ll sell it to get their money back. But if it sells for less than you owe them, they may want you to pay back the rest of the debt (the ‘mortgage shortfall’). This is no longer a ‘priority debt’, which means your lender can’t claim any more of your possessions or assets. But they can try to recover the debt for a long time up to 12 years. The National Debtline website gives advice about what to do if you’re being asked to make up a mortgage shortfall.

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