How to Deal with and Pay Off Missed Payments on Your Mortgage

Falling into mortgage arrears means you’ve missed one or more payments on your home loan. This can happen for various reasons, such as unexpected financial hardship or job loss. However, the implications are serious. Mortgage arrears are considered a priority debt, meaning they must be addressed before other non-essential obligations like credit card payments.

Failing to address mortgage arrears promptly can result in legal actions, including repossession proceedings. The lender has the right to reclaim your property through court intervention if a resolution cannot be reached. Recognising the gravity of this situation is the first step towards managing it effectively.

Immediate Steps to Take When You Miss a Payment

If you miss a payment, don’t wait for your lender to reach out. Most lenders will contact you within 15 days, but taking the initiative to communicate early demonstrates responsibility and seriousness. Open a dialogue with your lender to discuss options.

Lenders are bound by regulations that ensure fair treatment. These rules require them to consider alternative repayment arrangements before pursuing legal actions. Familiarize yourself with these regulations, as they can protect your rights. If you believe your lender has not adhered to these rules, you have the option to lodge a formal complaint.

Creating a Financial Strategy

Before engaging with your lender, it’s essential to evaluate your financial standing. This involves calculating your income, expenses, and any disposable income available for repayment. Utilise budgeting tools or seek assistance from organisations like Citizens Advice to construct a clear and realistic financial plan.

Options for Repaying Mortgage Arrears

Lenders typically offer several repayment strategies based on your financial capability:

Incremental Repayment Plans: Adding an extra amount to your regular payments to gradually clear the arrears. For example, if your monthly payment is £400 and you owe £400 in arrears, you could pay £500 monthly over four months.
Capitalising Arrears: Incorporating the arrears into your overall mortgage balance. This spreads the debt over the remaining term of the mortgage but may increase the interest paid in the long run.
Using Financial Assets: If you have a pension or an endowment policy, you might consider using these to clear the debt. However, this approach requires careful consideration, as it could impact your financial security later in life or incur additional fees for using these assets early.

Reducing Monthly Payments

If your financial situation makes it difficult to meet current payment levels, discuss these alternatives with your lender:

Extending the Mortgage Term: Spreading payments over a longer period can reduce monthly costs.
Switching to Interest-Only Payments: Temporarily paying only the interest on your mortgage can alleviate financial pressure.
Repayment Holidays: Taking a break from payments for a few months might be an option, especially if your financial hardship is temporary.

Additionally, if you’re eligible for Support for Mortgage Interest (SMI), this government benefit can assist with covering interest payments on your loan.

Navigating Legal Actions and Court Proceedings

If an agreement cannot be reached, your lender may apply for a type of court order called a possession order. This legal step allows them to sell your home to recover the owed amount. However, even at this stage, negotiation is possible.

Lenders are required to provide at least two weeks’ written notice before applying for a possession order. Use this time to explore alternative solutions and present any viable repayment proposals to the court. Ensure your lender complies with their legal obligations to treat you fairly throughout the process. Seeking legal advice or representation can strengthen your position.

HMS is the Repoessession Expert and helps people in similar situations. Every situation is unique but you can stop repossession with the correct actions and knowledge. We are able to help you, but that starts with a phone call.

Speak to our experts 24/7 about your situation, even if you are one hour away from repossession we can help. Call us now on 0800 298 0571.

Published On: November 11th, 2024