It’s never easy to fall behind on your mortgage payments. The monthly repayments are a major responsibility, and your lender can start to put a lot of pressure on you, even if you miss just one payment.
When you first take out a mortgage, you must ensure you can repay it. Often, once you factor in bills, household supplies, and more, your outgoings rise significantly higher than just your mortgage bill.
It is natural to feel concerned if you fall behind on your mortgage payments. But all is not necessarily lost in this situation – and there are steps you can take to repair the situation.
In the blog below, we have outlined what support the government can provide when you fall behind on your mortgage and more. Keep reading for some of the answers you need.
What are Mortgage Arrears?
The phrase’ mortgage arrears’ means you are behind on your mortgage repayments. Unfortunately, if the situation is not rectified soon, you are at risk of your house being repossessed.
One of the worst things you can do in this position is bury your head in the sand. It is far better to contact your lender and discuss it. After all, you are their customer, and they want to find a way to arrange a payment plan so all repayments can be met.
Does the UK Government offer any support to help me pay my mortgage?
Although the government will not pay your mortgage, it occasionally runs support schemes to help those who have fallen behind on repayments.
Support for Mortgage Interest (SMI) is the main initiative to help you pay off your mortgage. If you are entitled to SMI, the government will pay the interest on the first £200,000 of your outstanding mortgage. This will only continue if you cannot afford your mortgage repayments.
The money the government loans you to pay the mortgage interest is not free. When you sell the property, you must repay the state the amount they paid into your mortgage.
In other words, this can be a useful short-term solution to repaying your mortgage. Even if it has long-term downsides, it is far preferable to repossessing your house.
Not everyone is eligible for Support for Mortgage Interest, so you should check the criteria. Usually, you need to be applying for one of the following benefits:
- Income Support
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Universal Credit
- Pension Credit
According to the Government website, if you’re currently getting Pension Credit, you only qualify for up to £100,000 in interest support.
Additional Support in Scotland and Wales
While the UK government provides Support for Mortgage Interest as its primary financial assistance, residents of Scotland and Wales may be able to find additional local schemes that can improve their position.
In Wales, some local authorities and housing associations operate mortgage rescue schemes (MRS) to help people avoid repossession if they are likely homeless. You should speak directly to your local authority if you want more information.
The Welsh Government has also been known to run a scheme called ‘Help to Stay’. If you are struggling to pay back your mortgage, this is when you can apply for a shared equity loan. This loan is interest-free but must be repaid within 15 years, and you can only borrow up to 49% of your property’s valuation. You must meet several criteria to benefit from this scheme – for example, your property can be worth more than £300,000, and you must live in Wales.
In Scotland, the government currently runs two schemes that could be of interest:
- Mortgage to Shared Equity
- Mortgage to Rent
With the first option, the Scottish government can purchase a stake in your property – usually up to around 30% – so you can reduce your secured loan. This is a form of ‘Shared Ownership’, which will reduce the amount you receive when you sell the house further down the line.
‘Mortgage to Rent’ allows a social landlord, like a housing association or local council, to buy your home. You’ll continue to live there as a tenant.
If you want more information about either of these programmes, including whether they are still running at the time of reading, contact your local authority, who should be able to point you in the right direction.
Free Mortgage Advice
Even if you are ineligible for financial support from the government, free mortgage advice organisations can provide you with guidance and advice. For example, the ‘Housing Loss Prevention Advice Service’ can help if you risk being evicted due to failing to meet your repayments. In this position, you are entitled to free legal advice and representation in court when you receive a written notice from a creditor.
Other organisations that may be able to help you in some way include the Citizens Advice Bureau, National Debtline, Shelter, StepChange, and Christians Against Poverty.
Mortgage Protection Insurance
For those nervous about potentially falling into mortgage arrears later on, it may be worth taking out Mortgage Protection Insurance. Many people take out this policy when they are first granted a mortgage.
With this type of insurance, you are covered if you cannot meet your mortgage repayments because you have been made involuntarily redundant or because you have experienced an accident or illness that puts you out of work. These are common reasons people cannot meet their repayments – and in this instance, the insurance policy protects you.
Mortgage Protection Insurance covers your payments up to 65% of your annual salary. Usually, it pays out for up to 12 months or until you return to work – whichever comes soon. You may feel more obligated to take out this policy if you have a lifestyle that puts you at high risk of an accident – for example, you do dangerous sports in your free time, or your job involves a degree of danger.
In most cases, you must be off work for a specified number of days before the policy starts paying out—known as the deferred period. This period can range from 30 to 180 days.
Can I negotiate with my lender?
Yes, it is possible to negotiate with your lender to repay your mortgage, although some organisations are more responsive to others about this.
Your lender may be able to offer a temporary solution, such as a mortgage holiday or a reduced payment plan, to help you through this difficult time.
Generally speaking, your track record of making repayments can influence how responsive you are to finding a solution. If you have a long history of reliable payments and explain the situation to them, they are more likely to cooperate with you.
