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Wednesday, 3 October 2012

Mortgage arrears or payment difficulties

If you can't meet your mortgage repayments, or you're worried you might fall behind, you should contact your lender as soon as possible. Making early contact means that there may be more options available to you.

Contact your lender and agree a plan

If you are having difficulties paying your mortgage, contact your lender. Don't worry - lenders have special departments to help with payment problems, and they have methods that may help sort out your payment difficulties.

If you're struggling to pay, or are already in arrears

Depending on your payment history, your circumstances 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)
  • allow you to pay off the arrears gradually, alongside your usual payments
  • give you a 'payment holiday'
  • extend your mortgage term to reduce your payments
  • add your arrears to your mortgage and pay them back over the term
  • let you stay in your home while you try to sell the property and find somewhere else to live
  • suggest other assistance, such as one of the government schemes to help with mortgage difficulties

If you have other debts on top of your mortgage payment problem, speak to a money adviser. You may find that your best option is to agree to a reduced payment arrangement for any unsecured debts that you have, such as credit cards or personal loans. This will then free up some of your money to pay more towards your mortgage.

Always pay what you can

Pay as much as you can manage every month. Keeping up regular payments shows that you're committed to paying your mortgage and doing the best you can. Your lender is more likely to treat you sympathetically, and you'll minimise the arrears charges too.

Help with your mortgage

There are schemes that may help if you’re in difficulty with your mortgage payments.

Mortgage Rescue Scheme

The Mortgage Rescue Scheme may help if you are having serious difficulties making your mortgage repayments and are in danger of becoming homeless if repossessed.

Getting help to make your mortgage interest payments

Homeowners on certain benefits may be able to get help towards mortgage interest payments called Support for Mortgage Interest (SMI).

Help from Support for Mortgage Interest

From January 2009, if you are getting benefits (including income support, income-based jobseeker's allowance (JSA), or income-related employment and support allowance) you may qualify for help with your mortgage interest.

You can get help with a mortgage of up to £200,000 after a 13-week waiting period. If you are on pension credit you may be able to get help immediately, but only for a mortgage up to £100,000.

There is no help available for mortgage capital payments. 

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 unhappy about the way your mortgage lender has treated you

The Financial Services Authority (FSA) regulates most first mortgages taken out on or after 31 October 2004.

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 think you have been treated unfairly by a lender, you can complain to the Financial Ombudsman Service.

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 go to court to try and repossess your home and sell it to get their money back.

If you have other debts you should seek advice on which are the most important, and how to negotiate with different kinds of lenders.

Working out how much you can afford

Your lender, or a money adviser, 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.

Organisations that can give you free advice

You can get free independent advice about mortgage difficulties from several organisations. They'll help you work out what you can realistically afford.

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