Mortgage Payment Arrears: How Long Do You Have?

What Does Arrears Mean?

Technically, loan payments – including those for mortgages on residential properties – are overdue or in arrears from the day after a missed payment. Nevertheless, some lenders allow a grace period of up to fifteen days before contacting the borrower(s) concerned. For some people, this unofficial concession might be enough to get around temporary, one-off cash flow issues. In contrast, if the financial problem is more serious, a two-week breathing space is unlikely to resolve the outstanding amount.

How Many Months Before Repossession?

In most cases, three months of missed payments are a trigger point, but the delay can be longer.

Lenders are usually entitled to take action from the outset, but many of them see possession proceedings (repossession) as a last resort. In other words, banks, building societies and other mortgage finance providers do not usually want to initiate legal action unless they have to.

What Happens Next?

If and when a lender decides to initiate action, a protocol for mortgage arrears applies. Lenders have to follow an approved procedure and keep the mortgagor i.e. the borrower(s) fully informed. Additionally, the bank, building society or mortgage house must provide an opportunity to put the situation right before any repossession action starts.

Nowadays, lenders do not knock on the door at the outset. Typically, a sequence of standard letters warns of the situation and the possibility of action. In accordance with the accepted standards, borrowers have a fortnight to respond to such communications. Eventually, however, if the arrears remain uncleared, the lender will likely warn that they intend to apply to the relevant county court for a possession order.

If you have received a possession order, call us now on 0800 298 0571 or read our guide: How to appeal your repossession.

Pre-empting Repossession

For some people who run into spells of financial difficulty, even after adjusting the household budget, it is simply not possible to meet payments and clear the arrears. In such cases, one could approach the lender first. Being proactive and making contact in this way tends to create a favourable impression; lenders probably perceive such borrowers as more responsible and committed than those who ignore the signs of difficulty. All the same, before going to the office for an appointment, it is necessary to have a realistic plan.

You might wish to consult the gov.uk site. Help is available from the legal aid scheme and Civil Legal Advice for those who are eligible, or freely from:

• Citizens Advice.
• National Debtline.
• Shelter.
• Your local council.

Ways You Can Repay Your Mortgage Arrears

If you are forced to miss a mortgage payment you should get in contact with your lender. Usually, you can work out a way to get your mortgage paid by adjusting your monthly payments.

Read More: How to Clear Your Mortgage Arrears

Pre-empting Repossession

For some people who run into spells of financial difficulty, even after adjusting the household budget, it is simply not possible to meet payments and clear the arrears. In such cases, one could approach the lender first. Being proactive and making contact in this way tends to create a favourable impression; lenders probably perceive such borrowers as more responsible and committed than those who ignore the signs of difficulty. All the same, before going to the office for an appointment, it is necessary to have a realistic plan.

You might wish to consult the gov.uk site. Help is available from the legal aid scheme and Civil Legal Advice for those who are eligible, or freely from:

• Citizens Advice.
• National Debtline.
• Shelter.
• Your local council.

Missed Mortgage Payments

If you miss a payment of £300 for example you can always contact your lender and pay back a lump sum on a later date for the usual monthly fee plus the money in arrears. Alternatively, you can add an extra £100 to your next three months of mortgage payments. In both these situations, you will need to get this agreed upon with your lender.

Part Payments

If possible, offer the lender a part-payment and suggest an affordable level of regular repayments. Notably, they must allow time to claim government or mortgage interest support and provide an option to reschedule the payments under the terms of the protocol.

Pension and Endowment Policy

Both your pension and endowment policy can be used to pay off your arrears. If you are over the age of 55 and have a personal or company pension. You can cash in 100% of your pension as a lump sum to reduce or pay off your mortgage – up to 25% Tax-Free. However, this is not possible if you are currently paying into your pension or receiving money from it before cashing it for mortgage payments.

Never Too Late to Make a Payment

Notably, it could still take months for the case to reach court and a possession hearing. Significantly, it is never too late to make a payment or reach a possible agreement with the mortgage provider. Such initiatives could delay the process, move it back a step or two – or even halt it completely.

You Could Consider Selling the Property

Finally, depending on your housing needs, you could consider selling the property. If circumstances permit, even if it seems unpalatable initially, this option could be attractive in the long term. Experience has shown that houses sold by owner-occupiers tend to realise higher selling prices than repossessed properties when lenders take charge of the process.