What are mortgage arrears?
Your mortgage is among the most important financial commitments you have, and you should make it a priority to keep up with the monthly payments, by making them in full and on time. The reality, however, is that your mortgage is likely to be your biggest monthly outgoing, and unfortunately, many people struggle to service this debt fully. Failure to make the monthly payments leads to you falling into what is known as ‘arrears’.
What are the consequences of not paying my mortgage?
If you have mortgage arrears it is absolutely vital that you do something about them and do not simply ignore the situation. Your mortgage company will want you to bring your account up to date or they will almost certainly take further action. Failure to pay what you owe on your mortgage could see you being evicted from your home and the property repossessed by your mortgage company. Repossession is not a quick process to enact, so rest assured you do have options for resolving the problem before it reaches this stage.
What should I do if I cannot pay my mortgage?
The best thing you can do in this situation is to contact your mortgage provider directly, and see what options are available to you. If the arrears have been caused by a temporary lack of funds, such as you changing jobs, you may be allowed to pay back the arrears in small instalments on top of your usual monthly payment. Once you have brought your account up to date, your payment will go back down to the regular amount.
EXAMPLE: If your monthly mortgage payment is £450, and you have missed two payments, you will have arrears of £900. Your mortgage lender may allow you to repay this £900 through nine instalments of £100 on top of your usual payment. This means you would make nine monthly payments of £550 – this is made up of your usual payment of £450, plus £100 towards clearing your arrears. After nine months, your payment will revert to the usual £450.
Of course this option is only viable if you can actually afford to make these increased payments. Alternatively, your lender may allow you to add the arrears amount onto your outstanding balance and pay it off over the length of the mortgage. As long as your arrears are relatively small, this option will not significantly increase your monthly payment going forwards. The downside of this option, however, is that interest will be charged on the arrears, meaning you will pay back significantly more overall this way rather than paying it off over a shorter time period.
If you envisage yourself continuing to struggle to pay your mortgage going forward, you will need to look at a longer-term solution to the problem. This could include increasing the length of your mortgage, or temporarily switching to an interest only loan. While this may give you a better chance of being able to stay in your home, both of these options will see you paying back much more money over the life of the mortgage.
If you ignore the arrears, your mortgage company may have little choice but to begin court proceedings to obtain a ‘possession order’. This is a very serious step and could eventually lead to you losing your home. However, all lenders see repossession as an absolute last resort and would much rather resolve the situation before it gets to this stage by coming to a mutually acceptable solution that satisfies both parties.
Seeking professional advice is of paramount importance if you are struggling to pay your mortgage as time really is of the essence. Call our experienced advisers today for help and advice to get you back on track.