If you can't meet your mortgage repayments, or you're worried you might fall behind, it's important to contact your lender as soon as possible. Lenders have procedures for tackling payment difficulties and they'll try to help. You can also get free independent advice from other organisations.
Mortgage lenders are keen to help their customers sort out any payment difficulties. Also, the law says they must treat you fairly and take your circumstances into account. They may be able to come to a payment arrangement with you.
If you're struggling to make the payments:
Depending on your payment history and whether your difficulties are likely to be long or short term, your lender might agree to:
- reduce your payments for a set period
- charge you interest only for a while, if you've got a repayment mortgage (usually you pay capital and interest)
- give you a 'payment holiday'
- extend your mortgage term to reduce your payments
If you're already in arrears:
If you've already fallen behind, your lender will suggest a way to pay off the arrears gradually, alongside your usual payments. If you can't meet the extra payments, you may be able to delay them for a while or add them to your loan. Again, it depends on your track record.
Always pay what you can:
Pay as much as you can manage every month. Keeping up regular payments (even if they vary) shows that you're committed. Your lender's more likely to treat you sympathetically and you'll minimise the arrears charges too.
According to the Council of Mortgage Lenders, long-term arrears are still at relatively low levels although repossessions are up slightly but, nevertheless, considering all the main debt advice agencies have been reporting big increases in the numbers of people phoning their helplines, there is certainly cause for concern.
Local Citizens Advice offices dealt with 1.25 million debt problems last year while the Consumer Credit Counselling Service reports an increase of 27% in helping people to set up debt management plans. The number of people opting for bankruptcy or Individual Voluntary Arrangements is also rising rapidly.
And, although part of this can be attributed to greater awareness amongst the public of addressing debt problems sooner rather than later and that there are debt advice agencies offering help, it's still a fact that the major banks have been reporting sizeable increases in the amount of bad debts that they're having write off.
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