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Your home could be the most expensive purchase you make in your lifetime. Most people take out a mortgage debt from a mortgage lender or bank and agree to pay back the money borrowed over several years.

However, what happens when life takes a turn for the worst, and you are left struggling to pay your monthly mortgage payments? If you find yourself in this situation, then it is essential to act swiftly. Failure to do so could result in your home being repossessed.

In this guide, we will talk you through all you need to know about mortgage debt, as well as look at helpful ways to deal with your mortgage arrears without the risk of losing your home.

Find out when to spot the signs when you need debt help.

What should I do if I can’t pay my mortgage this month?

Paying your mortgage is a priority, so it is essential to pay your monthly payments on time every month. However, losing a job or ill health may mean you can’t pay your mortgage.

If you are struggling this month, then there are steps you can take to keep things under control before it is too late.

1. Get in touch with your mortgage lender

Communication is key. You might not want that awkward conversation with your mortgage lender, but swallow your pride and make the call.

Contact them and let them know you struggle to make your mortgage payment. Also, if you are actively negotiating with them, they can’t start repossessing your home.

When you make the phone call, your lender may offer you some alternative short-term solutions to get you back to speed with your finances:

  • Changing your payment amount for a short period.
  • Giving you a break in paying your mortgage for a limited time.
  • Make the payment later, which is also called a deferral.
  • Offering you to pay just interest on your mortgage temporarily.
  • Increasing the term of your mortgage so it will take you longer to pay but reduce your monthly payments.

2. Look at your budget

Your mortgage is classed as a priority bill; it is essential to pay this over your non-priority debts such as your mobile phone or credit card debt bills as they hold less severe consequences if you miss payments.

Look at your monthly budget and start sorting out your finances. If you haven’t already done so, begin collecting information regarding your income and expenditure, which can be used in your budget. Download our budget planner to help you get started.

Look at your bank statements and see any leaks in your finances. Identify your living costs from your luxury costs.

An excellent place to start with is your TV subscriptions. TV subscriptions are often seen as a luxury and can soon start adding up, especially if you have multiple subscriptions on the go. Stamping out those costs could save you money and help you pay your mortgage.

Reducing your monthly food budget could also help in a big way. Look at your monthly food bill and reduce wastage by meal planning and cutting back on luxury items, such as alcohol.

Are you in arrears with your council tax? Read more on how to get help with your council tax debt.

3. Check if you have Payment Protection Insurance

Check to see if you have any payment protection insurance in place. You will usually have been sold this when you first took out your mortgage, so dig out those mortgage documents to determine if you are covered.

If you have the insurance, you are eligible to make a claim. Typically, you can claim because you have lost your job, you had an accident, or you cannot work because of sickness.

This type of insurance is vital because it will stop you from getting into debt and cover your mortgage payments whilst you sort your finances out.

Can I delay or defer my mortgage payment?

If you have tried the steps above and you are still in arrears with your mortgage, then the next step is to ask your mortgage lender for a payment break on your mortgage.

It would help to get this authorised by your mortgage lender rather than assuming they will give you a mortgage break.

You will need to speak to them and confirm why you want a payment break. Valid reasons include:

  • Decrease in income due to an illness
  • Redundancy or a member of your household taking paternity or maternity leave

At the end of your payment break, you will have to pay back the money owed to the mortgage lender; however, you can discuss the best way to do this with your lender.

Will my house be repossessed if I miss more than one payment on my mortgage?

If you miss one or more payments on your mortgage, then your account will go into arrears. Therefore, it is crucial to act fast if you know there is a problem with your finances.

Procrastinating and hoping the problem will go away isn’t going to help. Instead, please speak to your lender and show them you are trying your best to get out of this unhealthy financial situation.

Even if you offer to pay what you can afford or show them your monthly budget, you are taking responsible steps to pay your missed mortgage payments back.

Repossession is usually the thing that people think of first when they have trouble paying their mortgage; however, your lender should see this as a last resort and instead look at alternatives to recover the debt owed to them.

What happens when I stop paying my mortgage?

The route of repossession does not happen instantly. Instead, mortgage lenders need to follow a specific process before repossession occurs.

1. Your mortgage lender must follow the industry rules and regulations

It will help if you, the mortgage lender, abode by the Mortgage Conduct of Business (MCOB) rules laid down by the Financial Conduct Authority (FCA).

In this set of rules, the mortgage lender must:

  • Treat you fairly
  • Give you a reasonable chance to make payments off the arrears
  • Must consider any reasonable request from you to change when or how you pay

If you feel your mortgage lender has not followed the rules, you can complain to the Financial Ombudsmen.

2. Your lender must follow a pre-action protocol

Before lenders can take you to court, they must complete a checklist to confirm that they have followed the protocol. Your lender must give a copy to the judge and you.

The checklist should include a list of things you should do:

  • keep in touch with your lender
  • act fairly and reasonably with your lender
  • try to sort out the payment of your arrears

The checklist should include a list of things your lender should do:

  • advise you of the total amount in arrears
  • advise you on how much you have left to pay on your mortgage, as well as disclosure of your interest or charges
  • provide you with an estimate or details of your interests that may be payable on your mortgage.
  • give you details on your current monthly payments and the amount you have paid over the last two years
  • Discuss with you the reason why you are in arrears, what your current financial situation is and propose a repayment plan.
  • Provide you with relevant information regarding homeless services and local housing authority details.
  • Give you a period to consider the proposal for payment by them.
  • they much consider any reasonable request from you to change when or how you pay
  • they must get back to you regarding your proposal as soon as possible (within ten working days)

What happens if I don’t keep to my payment plan agreement?

If you don’t or can’t keep to your payment agreement for your mortgage arrears, then they will take court action. However, they will write to you and let you know 15 days in advance.

When can there be a delay in starting court action for my mortgage arrears?

Sometimes there can be a delay in starting court proceedings by the mortgage lender to recover your debt. Some of the reasons include:

  • making a claim to your insurers under the mortgage protection policy
  • applying for a Support for Mortgage Interest (SMI) loan or Universal Credit (UC)
  • applying to the local council for homelessness prevention support
  • getting free independent debt advice, or you have an appointment with the debt advisor
  • Take steps to sell your home to pay off the mortgage
  • complaining to the Financial Ombudsman Service (FOS) about the way your mortgage lender has dealt with your arrears
  • You are exploring an arrangement with your mortgage lender, for example, extending your term and changing the type of mortgage.

What happens when my mortgage lender starts to take legal action?

1. The Review Date

Before your case goes to court, a review date will be set. The review date will include a free appointment with a debt adviser, whereby you will consist of a proposed arrangement for your lender.

If the lender agrees to the arrangement, the judge will order based on the agreement, and a court hearing won’t happen. However, if the lender declines the offer, a court hearing will be set.

2. The Court Hearing

A judge will make the following judgements at or after the court hearing:

  • Adjourn the case – The judge puts the case on hold for various reasons. For example, more information is needed; a complaint is being made to the Financial Ombudsman Service, or the lender has not appeared at the hearing.
  • Dismiss or strike out the case – This is when the judge doesn’t feel satisfied that your lender should repossess your property.
  • Outright Possession Order – This means that your lender has been permitted to take possession of your property. A date will be given for you to leave the property.
  • Suspended Possession Order – This means that you will be able to stay in your home if you keep up with the arrangement to pay off the arrears.
  • Money Judgement – This can be issued simultaneously as a possession order. This means that when your lender evicts you and they can’t get back all the money you owe from selling your property, they will make you pay the difference.

What are the court costs involved for mortgage arrears?

The lender is allowed to pass on all the costs to you. A court order does not need to be issued to do this. Costs include:

  • Court Fees
  • Solicitors Fees
  • Witness Expenses

You will not need to pay these outright, but they will be added to your mortgage for every hearing you need to attend.

How does mortgage arrears affect my credit rating?

Getting into debt with your mortgage can affect your credit rating, especially if you want to apply for more credit or a new mortgage.

This will hinder prospective lenders from allowing you to borrow from them. Even one missed payment can reduce your credit score significantly. Also, having a default notice or CCJ on your credit file could be even worse for your credit rating.

Mortgage arrears stay on your credit file for six arrears. Very late payments may include detailed notes on your credit file, which will show how many months it took you to make the payments.

Generally, it is your past 12 months’ payments that potential lenders will look at and how many payments you have missed. If your credit rating is looking poor, lenders, especially potential mortgage lenders, will be reluctant to offer you a mortgage.

Find out more on how you can improve your credit score.

Can I have late mortgage payments removed from my credit file?

Having a late mortgage payment removed from your credit file is at the discretion of your mortgage lender. This is called a ‘goodwill adjustment’.

A mortgage lender will consider the following:

  1. How long you have been with the lender
  2. How reliable with your payments have you been in the past.
  3. What the lender’s rules and policies are regarding this.

You must formally write to your lender explaining why your late payment should be removed. You could give reasons due to a loss of income or job, illness or a change in personal circumstance. Including supporting information, such as a medical note, could help in your favour.

Can I sell my house if I can’t pay my mortgage?

It is essential to seek financial advice before doing this; however, you can sell your house if you are in debt with your mortgage.

It is advised that this might be a better option if you know that the chances of your financial situation improving in the short term are very slim. You may consider buying a smaller property which would reduce your mortgage payments and help you budget within your means.

This is also a good alternative because if you continue to miss your repayments and your house is repossessed, you may get a reduced amount on your house sale if it goes to auction.

What support is available to help with my mortgage arrears?

At the end of December 2021, there was a staggering 79,620 homeowner mortgages in arrears in the UK, so you are not alone when it comes to mortgage debt.

Paying off your debts can be an uphill battle; however, help and support are available to get you through your financial struggles.

Contact our debt advisors for more help or look at some of the debt solutions available to you.

If you have debts of over £5,000, and you're struggling to repay them, get in touch today!

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