What to Do If You Are Behind on Your Mortgage Payments?
Paying back your mortgage is one of the most significant financial responsibilities that any person will have. If you have saved up to buy a house, the size of your deposit will impact your monthly repayments – and for those living in a particularly expensive house, the monthly costs may be very high.
Falling behind on your mortgage payments can be frightening, but it doesn’t have to be that way. There are lots of solutions to the problem, and plenty of ways you can limit the damage.
If you want to learn more about mortgage arrears – including what they are, what causes this situation, and what you can do to rectify it, then you’re in the ideal place. Keep reading our blog for everything you need to know.
What are mortgage arrears?
You have ‘mortgage arrears’ when you are behind on your mortgage repayments. There are lots of reasons why this may happen, but it is usually because the house owner does not have the funds to keep repaying their debt. In this instance, if you do not take action soon, you run the risk of your property being repossessed.
As a general rule, it is better to be proactive when you face mortgage arrears. You should contact your bank lender to discuss the situation, instead of waiting for them to contact you – as the sooner you do this, the more cooperative and understanding they are likely to be.
Sometimes, if you suspect that you will be unable to meet your monthly repayments in the near future, you could ask to pay back your debt over a longer period. Renegotiating your terms before a problem arises can be an intelligent solution that might avoid significant damage to your credit score.
What is a common cause of mortgage arrears?
Changing financial circumstances is the primary cause of someone falling behind on mortgage repayments – and there are lots of things that can result in this.
In the UK, turbulent economic conditions since 2020 means that plenty of people have struggled to meet their mortgage repayments in recent years. Interest rates have continued to go up, as have utility bills, which means that people have been forced to stretch their finances as thin as possible.
A sudden upheaval in your personal circumstances can cause you to fall behind on mortgage payments, too. For example, if your partner passed away unexpectedly, or you were made redundant, this may significantly decrease the income of your household, and therefore make it a real challenge to repay your debt.
Ways to pay back mortgage arrears
Firstly, if you have missed one of your previous payments, you could agree to add this amount onto future payments, to make up the difference. For example, if you missed your last payment of £1,000, you could agree to add £250 onto your repayments for the next four months, so you can pay it back.
In some cases, your mortgage lender may permit you to add your arrears to the total amount that you owe, and then pay it back over the lifetime of the mortgage. This is a generous solution that will have minimal impact on your finances in the short-term – it just means that you will be paying off your debt for longer.
You may be able to temporarily switch to interest-only payments. This is an option worth speaking to your lender about.
In some cases, you could be allowed to pay off your arrears using your pension or an endowment policy. This works as a type of life assurance.
What to Do If You Are Behind on Your Mortgage Payments?
It is not completely uncommon to fall behind on your mortgage repayments – and there are plenty of solutions to get around the issue.
The first thing to do is contact your mortgage lender and explain the situation. The sooner you can do this, the better.
Next you should discuss a way to pay back your mortgage arrears, if possible. In the section above, you can see a few suggestions for achieving this.
There may be government benefits available for you to take advantage of, so you should speak to any representatives, and do your own research online, to find out if this can help you.
In addition, there are plenty of organisations that offer free advice for people unable to meet mortgage repayments, such as Citizens Advice, National Debtline or StepChange Debt Charity.
Lastly, you may be able to get a ‘mortgage holiday’ in some exceptional circumstances. This will depend on the lender you are using, as well as your history of making payments, and other factors.
Ways to stop repossession
Even if you have fallen behind on your mortgage repayments, you still have repossession rights – so it is important to be aware of what these are. Your lender must give you at least two weeks’ notice if they plan to repossess your property – and during this time, you may be able to find alternative solutions, such as borrowing money from someone else to pay off the debt, or even selling your house.
You can fill in an N244 form to prevent repossession, if this has been threatened by a lender. This document enables you to request an emergency hearing in front of a judge, and make your case, in the hope that the repossession is suspended. You should get expert legal advice when filling out this form, as it can make all the difference when the judge decides whether to permit the repossession.
As mentioned earlier in this article, another method to stop house repossession is by selling your house. While this is an option you may not want to consider, it is sometimes the last resort for homeowners who do not want to live on the street, and who can instead use the sale money in the short-term to keep themselves afloat.
Can I renegotiate a new mortgage deal?
In the UK, a lender is usually legally required to give consideration to any request you make to change the way you pay your mortgage. This means that, yes, you can potentially renegotiate a new mortgage deal with your lender.
If you choose to renegotiate your mortgage because you can no longer afford the current one, then keep in mind that your new deal will usually have a higher interest rate. However, while in the long-term this is less profitable, in the short-term it may be essential to keeping you in your house and continuing to meet all your payments.
How does mortgage arrears affect your credit score?
Your credit score will be negatively affected if you are temporarily unable to meet your mortgage repayments. The impact it has on your credit score will vary depending on how recent it was.
For example, if your arrears were within the past year, this will cause greater concern for lenders when you are negotiating a new deal – but if the incident was several years ago, they may be more willing to look past it.
The extent of your arrears will also have an impact on your score. For example, if you only missed one payment, it would not make as much of a difference compared to someone who missed three months of payments.
