Mortgage debt and advice

Please note the council is not able to give financial advice and this page is for guidance and signposting only. Please contact the organisations listed within this page for official financial advice.

Don't sweep it under the carpet. Waiting only makes debt problems worse.

For many families, the cost of running a home has become increasingly difficult.

Broadly speaking, worry about paying your mortgage will stem from one or both of the following concerns:

That your mortgage payment will go up (if you are on a variable or tracker rate, or on a fixed deal coming to an end).
A change in your personal circumstances (such as being made redundant or losing some of your benefit entitlements).

If your mortgage is becoming unmanageable, you should act quickly to contact 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.

If you are having problems paying your mortgage (or secured loan) or are in arrears, help and assistance is available.

Where to 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.

Get free advice If you’re anxious about being unable to meet repayments, there are plenty of advice services which provide guidance for free:

National Debtline Breathing Space Scheme (or Debt Respite Scheme)

A scheme to give households time to receive debt advice and find a solution to sort out their debt problems. Breathing space will last for 60 days as long as applicants remain eligible during which time all creditors who have been included will be informed and must stop any collection or enforcement activity.

The Breathing Space scheme can help people struggling with debt, including rent or mortgage arrears.

It can freeze payment demands and legal action while you get free debt advice.

It could also stop or delay eviction for rent arrears or mortgage repossession.

You can have a:

standard 60 day breathing space
mental health crisis breathing space

A mental health crisis breathing space doesn't have a time limit. It usually ends 30 days after you stop getting mental health crisis treatment, but you can apply again.

Your debt adviser may be able to give you ongoing help when breathing space ends.

Only a regulated debt adviser can put you on the breathing space scheme.

You'll need to:

provide details of your income, spending and debts
be prepared to work with a debt adviser on a longer term debt solution

Get free regulated debt advice from:

Do you have Income Protection insurance (IP)?

Check to see if you have an Income Protection policy, this is an insurance policy that can help support you with a monthly payment if you’re ill or injured and are unable to work. It is normally taken out alongside your mortgage deal. It pays a proportion of your lost earnings, which could help cover your monthly outgoings.

Income protection can provide you with either a fixed monthly benefit amount or cover a percentage of your earnings following the deferred period. The benefit amount can be paid for each eligible claim for a set amount of time from up to 12 months, or until retirement.

If you do find you have a policy, contact your insurer as soon as possible to ensure there is not a delay in payments.

Equity release may be a solution for over 55's

Equity release allows individuals aged 55 and over to release money from the property they live in without having to make any monthly repayments. There are two types of equity release: Lifetime Mortgages and Home Reversion plans. Learn more by visiting Equity Release Council website.

Support for Mortgage Interest (SMI)

If you are an owner occupier or in a shared ownership scheme, Universal Credit may help with the interest on a mortgage and/or other loan secured on the property you live in. This is called Support for Mortgage Interest (SMI), and is paid as part of the Housing element.

You may receive SMI if you and/or your partner:

have a mortgage and/or loan secured on your property, or make alternative finance payments for the home you live in
have been receiving Universal Credit continuously for 9 assessment periods (9 months)
have not had any earned income during that time

Since 5 April 2018 SMI became a loan, which means any SMI you receive from this point must be repaid with interest when you sell or transfer ownership of your home. Prior to this date it was a benefit that did not need to be paid back.

Benefits

Ensure you claim all the benefits you are entitled to under Universal Credit.

Try using an online benefit calculator or you can contact your local Citizens Advice .

What happens when a lender files for or threatens repossession?

Even if your lender has started repossession 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.

All mortgage lenders are regulated by the Financial Conduct Authority (FCA).

The FCA has rules about how lenders deal with their customers. These are called the Mortgage Conduct of Business (MCOB) rules.

Your lender must treat you fairly. They must consider any suggestions you make to deal with payment problems and arrears. Your lender should not repossess your home unless all reasonable attempts to resolve the situation have failed.

Alternatives to repossession

With your agreement the lender should consider whether to:

delay interest payments
extend your mortgage term
change the type of mortgage you have
add the arrears onto your total mortgage debt

They should allow you time to sell your home if you cannot come to a repayment arrangement.

They must keep records of their contact with you including phone calls where arrears or charges are discussed.

More information can be found here: Repossession rules mortgage lenders must follow - Shelter England

Beware of quick sale and sale and rent back companies

In the years before the FSA regulated the Sale and Rent Back industry a number of unscrupulous companies unfortunately took advantage of homeowners. The largest false promise used at the time was the one that said sellers could stay on indefinitely after selling.

Present Day

Currently the sale and rent back (SRB) industry is shut for business.
There are zero regulated firms currently trading.
Do not put your home at risk of being offered SRB illegally by unregulated firms advertising on the web.