Updated: Nov 23
It is no secret that many mortgage holders might be struggling right now, and there may be times when you find it too difficult to make your monthly payments. Whether this is a permanent situation or only for the short-term, maintaining your mortgage payments can sometimes feel overwhelming. If you’re currently in a position where you feel like you can’t meet the repayments on your mortgage, try not to worry too much. Take a deep breath, and have a read of this helpful guide which has been designed to point you in the right direction when it comes to dealing with mortgage debt.
Speak to your mortgage lender
If you’re currently struggling or worried that you can't pay your mortgage, or if you have an inclination that you may be unable to meet your monthly mortgage repayments in the future, your first port of call is to speak to your lender. Mortgage lenders are usually open to discussion and should be happy to talk about ways in which you can better manage your monthly repayments. Ways in which major lenders are happy to negotiate can include (amongst others):
Extending the existing mortgage term by reducing monthly mortgage repayments.
Changing how often you make mortgage payments.
Check if they can offer you a ‘payment holiday’.
As part of the Mortgage Charter, introduced in August 2023, due to rising interest rates the largest UK Lenders have agreed to offer more support for those struggling to meet mortgage repayments. As part of the mortgage charter lenders will provide personalised assistance and expert guidance for customers facing financial difficulties. This may involve extending the mortgage term, offering interest-only payments, or exploring other options such as temporary payment deferrals. The most suitable solution will be determined based on individual circumstances.
I’ve already missed one or more mortgage payments: what now?
If you’ve missed one or more of your monthly repayments, this will be reported to credit reference agencies as a late payment. It is vital that you communicate with your lender as soon as possible as they will be keen to support you at this difficult time.
Missed or late payments will remain on your credit record for several years, and could negatively impact your credit score in the future. If you have a poor credit history, you may find it difficult to obtain another mortgage. Unless you can find a way to rectify the issue, every standard UK mortgage provider you apply to in the future will be aware of any credit rating issues you have when making a new mortgage application, and this could affect how much you could borrow, or could even prevent you from taking out a mortgage loan completely.
Enquire about government mortgage assistance
The UK government may be able to help you with your mortgage repayments depending on your personal circumstances. While the government will never pay the full outstanding amount on your mortgage, they may help with meeting interest payments to your lender. This scheme is known as Support for Mortgage Interest, or SMI, and could help to temporarily alleviate money worries and at least keep the interest paid for the time being.
To find out whether you could be eligible for SMI, you can use an online mortgage calculator. If you are currently out of work, you may also be eligible for help in the form of benefits – information of which is available on the gov.uk website.
Consider remortgaging to get a more suitable deal
When faced with financial difficulties, some would prefer to see if they can arrange a new mortgage deal, or perhaps switch to an interest-only mortgage. An interest-only mortgage is when you only pay interest for a specified amount of time, the SMI scheme can often cover this.
However, getting a mortgage where you only pay the interest due is always dependent on current mortgage deals, so switching to such a scheme isn’t always an option. Your mortgage broker or advisor should be able to advise you as to whether you can switch to an interest only mortgage. It can be incredibly beneficial if you can enter into an agreement where you are only paying interest, as it provides some breathing space until you find yourself in a more financially secure position.
Home repossession: how it works
If none of the previous options are available to you and you are struggling to meet the repayments expected by your mortgage providers, the worst case scenario is that your home could be repossessed. If you are already in this space, having exhausted all options, you should now consider selling your home without delay - take this step now before your lender takes control by repossessing your home.
Lets be clear though, when offering a mortgage loan, lender’s risk losing out on the purchase price of the property value. If they are unable to recoup monthly payments from you, and you are unable to come to an agreement on new mortgage terms with them, the final option available to them is to take your home from you. If this happens, your name will be entered on a register, your credit scores will be impacted and you could struggle to get a mortgage in the future.
Usually when this happens, the lender will put the house up for sale as quickly as they possibly can. If they don’t receive enough money to cover the entire loan, then unfortunately you will be expected to pay the same lender the remainder of the outstanding balance.
Take Control of the Situation
If you can’t get a new mortgage and feel like you may be destined for the repossession route, it makes sense to sell the house yourself before the provider of the mortgage loan takes it from you to sell at auction. You are likely to raise a greater amount by selling the property yourself than the lender would at auction. Once your property has been sold, you can then compare mortgages and consider moving into a smaller property, of which you may be in a position to pay upfront once the sale of your existing home goes through. Alternatively, you may wish to seek a new mortgage on another more affordable property.
Planning and budgeting
Before you end up in arrears, it can be useful to take stock of your existing finances. This will allow you to budget accordingly. To do this, you may find it helpful to create a list that takes into account how much money you have coming in each month, and compare this with a list of all the monthly payments and outgoings you can think of.
It’s not only mortgages that are essential costs. Some of your outgoings – such as utility bills and food costs – will be unavoidable. However, when you sit down and make a detailed budget, you will hopefully be able to identify any non-essential outgoings you can cut back on, such as socialising costs, charitable donations, a lottery subscription or streaming service subscriptions.
Once you’ve highlighted these flexible outgoings, you should be in a position to make a decision on where you could potentially cut back on spending. It might not seem ideal, but by tightening the purse strings you are able to meet the demands of your lender. If this seems feasible, you might want to try using a repayment calculator to see how quickly it will take you to get back up to speed with your arrears.
Tips to help you avoid getting into mortgage arrears
Don’t take on more debt to pay off existing debt. Although a loan to cover your existing arrears might seem attractive in desperate circumstances, it is never beneficial in the long run, as these loans can be expensive and are often secured against your property.
Speak to your current lender about your options under the Mortgage Charter.
Don’t dive in head first and sell your home without immediately planning where you’re going to live. Doing so could put you at risk of becoming homeless.
Never hand your keys back under the impression that you’re walking away from the mortgage. Even if you give the keys back to your lender, the house will still technically belong to you, and you’ll therefore still be responsible for any repayments that need to be made before (and potentially after) the house is sold.
Get in touch with your lender or contact a debt advice service to obtain free confidential help regarding your situation.
Try not to stress too much. If you’re struggling to meet the monthly repayments on your mortgage, you could always sell your property, consider downsizing and apply for a mortgage on a smaller property.
Find out more
If you can’t pay your mortgage, or if you’re worried that you may fall into arrears in the near future, contact us today where a member of our friendly and experienced team will be happy to discuss your existing situation and provide you with information and advice on how best to move forward.