Summary: This article aims to give advice as to what action to take struggling to repay their mortgage, including setting up a budget and support available from the government.
Missing just one mortgage repayment will result in an individual getting into arrears. This can quickly spiral out of control if not dealt with immediately. There are a number of early steps that can be taken to avoid court action and potential repossession.
Contact the mortgage lender.
At the first sign of difficulty, an individual should contact their lender. They may be able to offer a temporary solution such as a mortgage holiday, or temporarily reduce repayments until the individual is in a better financial position. These solutions could, of course, increase the length of the mortgage term, but will prevent the home being repossessed. Speaking to the lender shows them that the individual wants to resolve the situation and they are likely to be more understanding.
Set up a budget.
After contacting the mortgage lender, an individual should assess their income and outgoings, and establish a budget. Any payments that are not essential should be stopped, such as luxury goods and services. If income is lower than essential outgoings as a result of multiple loans, then the individual may wish to consider a solution such as an Individual Voluntary Arrangement (IVA) if they have multiple debts with different lenders (although the mortgage itself cannot be included within an IVA) or a Debt Management Plan (DMP).
Continue to repay as much as can be afforded.
Rather than stop repaying the mortgage altogether, an individual should try to pay back as much as can be afforded. This will reduce the overall amount of arrears, and also show the mortgage lender that everything is being done to repay the loan.
What government help is there to help pay a mortgage?
Depending on the individual’s circumstances, they may be eligible for Support for Mortgage Interest (SMI). I order to qualify, the individual be getting either Income Support, income based Jobseekers Allowance, Employment and Support Allowance or Pension Credit. SMI will only help repay the interest on a mortgage. For further information, an individual should contact their local Jobcentre Plus to discuss eligibility.
It is important to remember that under the rules laid out by the Financial Services Authority (FSA), mortgage lenders have to treat their customers fairly and give a reasonable chance to make arrangements to repay any arrears. For further advice, contact the Citizens Advice Bureau (CAB).