Your mortgage lender would rather reach agreement with you over arrears payments instead of evicting you. Here are some suggestions you could offer to repay your arrears.
The advice here also applies to existing Debt Consolidation Loans secured on your property.
Prioritize Mortgage Payments.
Many people we speak to have fallen into mortgage arrears as they are paying lower-priority debts at the expense of their mortgage. This is a classic mistake.
People tend to pay unsecured debts (ie overdraft, credit cards, etc) and unsecured Debt Consolidation loans ahead of their mortgage because unsecured creditors shout sooner and loader when payments are missed. This is because they don’t have the security of repossession to enforce payment.
If by reducing your unsecured loan repayments, you could afford your mortgage, then this is a solution we may suggest. This is normally by means of a debt consolidation loan, debt management programme, or possibly an IVA should your circumstances qualify.
Offer token payments
You can offer to repay the arrears over any period of time within the remaining term of the loan.
Try to start arrears repayments as soon as you can – no matter how small. Offer to make inroads into the arrears by paying a bit more each month in addition to your monthly payments. Even if your mortgage lender doesn’t think you’re offering enough, pay the extra amount anyway – they can’t refuse to take it and the good intention you are showning now may make the difference between repossesion and keeping your home at a later date.
Explain why you can only afford this amount – they may not be aware of your circumstances. Until you explain your problems, you’re just another account number.
Ask to delay repayment of arrears
If you are able afford your normally monthly payments, but can’t afford anything towards the arrears, you could ask your lender if you can delay arrears payments for the time being pending a review in say, 6 months.
You would need to offer a convincing arguement why you can’t afford repayments now, but are confident you will be able to pay in the future.
Ask to add the arrears to the mortgage loan
You could ask your mortgage company to capitalise your arrears. This means adding them to your total mortgage balance, spreading the arrears over the remaining period of your mortgage.
This will increase monthly repayments, but not greatly. You will go deeper into debt this way, but no one else is likely to offer you a better rate than your current mortgage provider.
If you’ve failed maintain revised repayment arrangements before or if you have negative equity when taking into account the arrears, this is unlikely to be a option available to you.
Ask to Extending repayment period of your mortgage
This will mean your monthly payments do not rise to cover the extra arrears repayments. However, you will pay back more in total as you’ll be in debt longer. This will cost more in the long run than adding the arrears to the mortgage.
An extension is more difficult to arrange if you have an interest-only mortgage and are using an endowment policy, PEP or ISA to pay off the loan.
Ask to take a payment holiday (Interest only mortgages)
If your mortgage is interest only but linked to an endowment policy or PEP etc, and you can’t afford both sets of payments, (the interest payments on the loan and the payments towards the endowment policy), you could ask the endowment policy company if you can suspend paying into the endowment for a while.
You may have to reach agreement with them how to catch up the payments once you restart payments into the policy. Otherwise, at the end of the mortgage the policy may not be large enough repay the loan in full.
Cash In or Sell Policies (Interest only mortgages)
If your endowment policy has built up a reasonable value, you could use it to clear the arrears. This would mean having to take out a repayment mortgage, or finding another way to ensure you are able to repay the money borrowed. Before you surrender an endowment policy or change to a repayment mortgage, you will need to speak to your mortgage lender and the endowment company.
If you surrender your policy early, its value can be considerably reduced. You should think carefully before you do this, and first ask your endowment provider how much you would get should you seek to surrender it now.
Sell your property yourself
If you can’t see a way to affording your mortgage repayments in the long term, then don’t sit back waiting for the inevitable.
If your home is repossessed by your creditors, they will take control of its sale. Their intention will be to arrange for a quick sale to recover their money, normally at auction. Under such circumstances, properties tend to sell for around 85% of their true market value. This is clearly not in your best interests.