Mortgage arrears

If you are experiencing mortgage arrears be assured that you are not alone and that there are numerous sources of help. The recession has put added financial pressure on many people, and many lenders have learnt to be more understanding than they may have been in the past as it is in everyone’s interest that mortgage arrears are tackled as early and effectively as possible.

Even in boom times many changes in circumstance cause mortgage arrears, such as ill health, relationship breakdown, reduced working hours and redundancy. If problems arise it is important to speak to your lender as soon as possible to inform them that you need mortgage arrears help.

When one or two payments are missed after a sustained period without arrears it is likely that the lender will contact you by telephone and/or letter. If the lender has had no response from the borrower once three payments have been missed they may begin proceedings to repossess by applying for a court possession order. In such a situation not only would you lose your home, but you would find it more difficult to borrow money in the future.

It is important, therefore, to show from the start your willingness to clear the arrears as soon as possible and to seek mortgage arrears advice. Your lender is then more likely to show leniency, possibly by accepting lower payments or a payment holiday for a while. It may offer to charge you only the interest for a set period if you have a repayment mortgage, or extend the mortgage term to reduce your monthly payments.

Investigate any ways possible to clear the arrears. If your lender is offering loans at a cheaper interest rate, ask whether you can transfer to that. Are you eligible for benefits such as Working Tax Credit, Child Tax Credit or Council Tax Benefit that may increase your income?

Pay what you can but only as much as you can afford. Your lender will prefer smaller regular payments than the promise of a larger sum that you later cannot keep to. Switching to another lender is likely to be difficult as they will learn of your missed payments history.

From a first missed payment to eviction may take around a year, but could be as little as eight months or so. If, from the first payment to the application for an eviction warrant, you can manage to agree a payment schedule with your lender, the lender is likely to stop the eviction proceedings. And even when a property has been repossessed, some lenders will return the keys to the borrower as long as the arrears have been cleared in full.

Look into every possible option to avoid having your home repossessed. Could you take on another job just for a short period to get back on track? If your home is big enough, could you temporarily take in a lodger or register with a bed and breakfast agency?

There are numerous organisations that offer mortgage arrears counselling and the UK Government’s Directgov website (www.direct.gov.uk) lists ones that can give free advice as well as lots of other useful information.

By Ben West