If you are having problems paying your mortgage (or secured loan) or are in arrears, help and assistance is available.
The first step is to talk to your lender. Do not ignore any payment problems - mortgages are priority debts. This means you should pay them before any other debts as not doing so could lead to your home being repossessed. Even if you cannot meet the full monthly instalments, pay what you can and contact your lender as soon as you start having payment problems.
Many major lenders have agreed to wait at least three months before taking repossession action (during which time they should make efforts to contact the borrower to discuss the arrears).
Where do I start?
If you are struggling to pay your mortgage, it can be useful to complete an income and expenditure assessment. This will enable you to take control of your finances and see where you may be able to increase your income or reduce your outgoings.
A detailed breakdown of your income and expenditure will help your lender(s) understand your financial situation. This will enable them to advise which solutions are most suitable for your situation and come to an arrangement.
Even if you cannot afford your full mortgage payments, pay as much as you can to show your lender that you are committed to resolving the situation.
- Mortgage Payment Protection Insurance (MPPI)
If you have lost your job or are too ill to work, check whether you have MPPI. MPPI is designed to cover your mortgage payments if you are unable to work due to accident, sickness or unemployment. MPPI pays a set amount towards your mortgage usually for a period of 12 or 24 months.
You will need to contact your insurer as soon as possible to ensure there is not a delay in payments.
- Support for Mortgage Interest (SMI)
If you are homeowner and in receipt of certain income related benefits, you might be able to get help towards the interest payments on:
- your mortgage
- loans you’ve taken out for certain repairs and improvements to your home
If you qualify for SMI, you will get help paying the interest on the first £200,000 of your loan or mortgage. If you are getting Pension Credit, this figure is £100,000.
The standard interest rate used to calculate SMI is currently 3.63%. This is the rate you will receive regardless of the rate of interest on your mortgage/secured loan.
Where a mortgage is taken out partly for another purpose such as buying a car or providing a business loan, SMI will only pay interest on the part of the loan associated with the house purchase or repairs.
Ensure you claim all the benefits you are entitled to such as Working Tax Credit, Child Tax Credit or Council Tax Benefit. Try using an online benefit calculator or you can contact your local Citizens Advice .
- Mortgage Pre-Action Protocol
The Mortgage Pre Action Protocol sets out the steps that lenders are expected to take before starting court action. It encourages lenders and borrowers to explore all the available options for paying off arrears and avoiding future payment problems. If the protocol has not been followed, you can request that the hearing be adjourned to enable you to negotiate with the lender.
Your lender should discuss their hardship options with you. They may:
- Agree to change or lengthen the term of your mortgage/secured loan
- Allow you to change from repayment to interest only for a period
- Accept reduced payments from you in the short term
- Add your arrears to the amount you borrowed (capitialise the arrears)
- Spread the repayment of the arrears owed over the remaining term of the mortgage/loan
- Offer you a better loan rate
- Allow you time to sell your home
- Possession Action
Even if your lender has started possession action, it is not too late to come to an arrangement. If you are able, you should offer your current monthly payment, plus an affordable amount off the arrears.
Lenders usually calculate arrears payments based on the amount of arrears outstanding, divided by the number of months you have left to pay your mortgage.
It is vital that you attend the court hearing so you can explain your situation to the judge. It is not unusual for agreements to be made between borrowers and the lenders representatives in court, prior to the hearing.
Beware of quick sale and sale and rent back companies
Quick sale and 'sale and rent back' companies often advertise in areas where repossession rates are high. Quick sale companies will usually offer to purchase properties for far less then their market value.
Sale and rent back properties buy homes and rent them back to the formal owner for a fixed term. As with quick sale companies, the price they offer is often much lower than market value. After the fixed term, the company can serve the tenant notice.
Basingstoke and Deane Borough Council
Basingstoke Citizens Advice
The Discovery Centre
19-20 Westminster House
0300 3309 064
Tadley Citizens Advice
03444 111 306
Money Advice Service
Money Advice Line 0800 138 7777
Housing advice line: 0808 800 4444 (8am-8pm Monday- Friday or 9am-5pm Saturday- Sunday)