A mortgage is one of the biggest financial commitments any of us make, but the ups and downs of life mean there may be times when we find ourselves facing unexpected financial hardship. What should you do if this leaves you unable to pay your mortgage?
Failure to repay your mortgage on time means you are in arrears and ultimately, can lead to repossession. Always seek advice from an independent service such as Citizens Advice Bureau or government backed MoneyHelper. In 2020, the Government ploughed £37.8 million of funding into debt advice providers to advise those struggling to make repayments
Communicate with your mortgage lender
Speak to your mortgage lender as soon as you become unable to repay your mortgage and ideally before a payment is missed. If your financial situation has changed due to redundancy, illness, accident or death in the family, lenders usually have specialist teams in place to deal with this. Lenders will take your personal circumstances into account when dealing with missed payments and they may offer you one of several courses of action.
You may be offered the chance to change when you pay your mortgage or to reduce your payments for a short period of time. It may be possible to extend your mortgage period to reduce your repayments or even renegotiate your monthly interest payments. Other possible options include changing to interest only payments or even switching to a cheaper mortgage.
Make an offer to your lender
Those struggling to repay their mortgage should try to make a written offer to their lender detailing their circumstances and what they could pay. The letter should include the amount you can afford to pay each month, details of your household budget and reasons why you are struggling to make payments. Under Financial Conduct Authority regulations, lenders are obliged to treat someone in arrears fairly and give them a reasonable chance to pay the debts off. Take a good look at your finances and see if you can make any savings which you could spend instead on repaying your mortgage and try to offer some repayment.
Check your insurance and Government support
If you have any mortgage insurance, you could start claiming it now. Contact your insurance provider to see if you are covered according to your circumstances. Those who are on certain benefits may be able to get Support for Mortgage Interest (SMI), which pays some of the mortgage interest for you in the form of a loan. This is only for those claiming income support, income-based jobseeker’s allowance, Employment and Support Allowance, universal credit or pension credit.
Repaying a Help to Buy loan
The Help to Buy Scheme saw hundreds of thousands of people given help to buy a home by paying a smaller deposit and obtaining a Help to Buy loan against the property. Repaying the loan requires the services of a solicitor, such as Sam Conveyancing, and you will need to contact them if you are having trouble making your Help to Buy loan repayment.
Each lender has their own procedures in place for dealing with people in arrears. If you fear you cannot make mortgage repayments, always speak to your lender first and seek advice from experts to try to avoid repossession.