What to do if you can’t pay your mortgage

What to do if you can
What to do if you can't pay your mortgage

Six steps to follow if you can’t pay your mortgage: 

 

1. Contact your lender early

As soon as you think you might have a problem with your monthly payment, reach out to your lender straight away.

This includes situations where you can’t pay in full or on time, or even if you can’t pay anything at all.

If your lender contacts you directly, please don’t ignore them – engage with them so that they can help you stay in your home. Speaking to your lender will not trigger the repossession of your home – the opposite is true.

All mortgage lenders are regulated by the Financial Conduct Authority, which states that lenders must treat everyone fairly, with special provisions for vulnerable people.

 

2. Assess your situation 

Work out a household budget:

  • Check how much money you have coming in, and what you are spending it on.

Prioritise your bills:

  • Make sure that you are paying for your household essentials first.
  • Your food, fuel, and council tax bills should come first, along with your mortgage repayments.
  • Some debts are also more important than others – your council tax and mortgage are priority debts.
  • You can find budget planners here.

Change your debt repayments:

  • Get in touch with a debt advisor such as StepChange who may be able to support you in speaking to lenders and arranging your payments into a single more manageable plan.

Check whether you are receiving all of the help you may be entitled to:

 

3. Keep in contact

Keep your lender informed about what you are doing, and tell them about any further changes to your circumstances.

Honesty is key – this is what will help you in the long-run.

 

4. Show that you are willing to pay what you can 

Lenders can offer you tailored support, and this may include a reduced monthly payment.

Please be realistic when setting up these monthly payments – the amounts you pay should be sustainable in the long-run.

If your lender arranges a reduced monthly payment, please pay this smaller amount regularly and on time.

If you can’t pay for any reason, tell your lender immediately.

 

5. Explore all your options 

Your lender does not want you to lose your home – repossessing your home is their last resort.

You can ask your lender for adv ice about the best way forward, for example they may suggest switching to a fixed-rate mortgage.

Here are some of the options that are available to lenders: 

  • Changing how you pay, or the date you pay.
  • Reducing your monthly payments by increasing the term of the loan.
  • Reducing your monthly payments for a limited time and creating a repayment plan for any arrears.
  • Adding any arrears to the outstanding amount instead of asking for immediate payment.
  • Temporarily moving your payment plan to an interest-only basis.

 

6. Always take advice from trusted sources

Please only take advice from people with the necessary expertise, and be wary of solutions that appear too good to be true.

What to watch out for and avoid:

  • ‘Sale and rent back’: some companies may offer to sell your house very quickly for less than the market value, which may look like a quick and easy solution. But this may lead to you only getting a 5-year long tenancy, risking eviction at the end of it even if you kept up with the rent. You may also lose benefits such as Housing Benefit.
  • Individual Voluntary Arrangements: IVA companies may offer to make your debts ‘disappear’ by putting them into a single repayment plan, but this may come at a very high cost. Always speak to an independent debt advisor before signing up for an IVA.
  • Taking out another loan to repay your debts: in the long-run, the high interest rates that may be associated with these arrangements can be very high. If the new loan is secured against your home, you might put it at risk if you don’t keep up with repayments.

So who can I contact? 

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