Mortgage Arrears

Mortgage Arrears

• Contact Your Lender

  Remember that many people are in the same situation. This means that your lender may have services to offer you help and advice. You do not have to have immediate proposals to offer. A telephone call or letter to explain your difficulties and ask for time to get advice can help forestall the lender from taking immediate action.

• Offer an Affordable Sum

  Don't offer what you can't pay, your lender is looking at a set of accounts and will not know about your personal circumstances unless you have been in regular contact and explained everything fully. It is better to offer a realistic payment which you can maintain than promise more than you can afford to pay. Ask your lender what alternatives there are for making it easier to pay. If you have a mortgage where you pay both interest and capital they may accept interest only for a period of time. If you have an endowment mortgage you can request a "freeze" of the endowment premium.

• Your Outgoings

  Are you paying other debts and missing your mortgage payments? other creditors may write, telephone or call to see you more often about the money you owe them. This is because they ultimately have less power to enforce payments. You can only lose your home if a loan is secured against it, so the mortgage and any secured loans must take priority for payment. Contact your creditors and let them know you will pay when you can. Ask them to freeze the interest on the debt. Explain that you must give priority to payments for your home.

• Make Yourself a Budget

  List the money you have coming in. List the payments you have to make, putting the most important creditors first. These are the payments which will keep you in your home and maintain essential services.

  Some creditors - for example, Council Tax or Inland Revenue, have extra power to enforce payments so they need to be listed as priorities also.

  Enlist the help of your family and think about whether you can reduce your outgoings at all, by cutting costs in the home.

• Your Income

  There are benefits you may be entitled to if you, or a family member, is disabled or has been sick a long time. Are you getting the right tax relief? If you are on income support are you being paid the full entitlement? It is worth checking that your benefits or tax have ben worked out correctly.

• Contact Your Creditors

  Send your creditors a copy of your budget. This will show them what your real money situation is. You can only make an offer of payment to other creditors once the mortgage and other essential costs are covered.
  
  If one of your creditors has got a money judgement against, and all your debts are less than £5,000 you may consider applying for an administration order in the County Court. This means that you make one payment regularly to the Court and it is divided between your creditors. An Administration order will not normally include creditors such as mortgage companies, water or fuel boards.

• Don't Borrow

  It is rarely useful to borrow in order to pay arrears. This usually only means you are paying more interest on the original debt. Lenders who offer loans in high risk situations charge more interest for doing so and will penalize missed payments and arrears more heavily.
  
  It may be possible to get 'time to pay', a loan secured on the property, by application to the Court. A 'time order' can be made on loans which were not taken out for purchase, and are less than £15,000. You will need to show that you expect to be able to resume the normal payments in the future.

• Get Advice

  A Housing Advisory Officer can help you:

  • Contact your creditors to get a full and accurate picture of how much you owe;

  • Check your benefit, tax entitlement and discuss options for increasing income;

  • Prepare an income/expenditure sheet to send to your lender and other creditors;

  • Agree realistic offers for payment;

  • Prepare for a Court hearing;

  • Attend with you if required;

  • Apply for an Administration or Time Order if appropriate;

  • Discuss other alternatives - remortgage, sale & repurchase, sale & clear debts,  applying to the Council & Housing Associations, renting in the private market.

Other alternatives for advice include: Citizens Advice Bureau, Shelter or Solicitors' firms.